2. www.linkedin.com/in/maylin-calva
• How do consumers process and evaluate prices?
• How should a company set prices initially for
products or services?
• How should a company adapt prices to meet
varying circumstances and opportunities?
• When should a company initiate a price change?
• How should a company respond to a
competitor’s price challenge?
Outine and Objective:
The Price is Right?
4. www.linkedin.com/in/maylin-calva
The internet and the Price:
When the Price is Wrong
1. Determine costs and take traditional industry
margins
2. Failure to revise price to capture market
changes
3. Independently pricing of the rest of the
marketing mix
4. Failure to diversify price portfolio (product
item, market segment, distribution channels,
and purchase occasion)
And how to make it right:
6. The internet and the Price:
Consumer and Price
1. Fair price
2. Typical price
3. Last price paid
4. Upper-bound price
How to read Customer mind:
www.linkedin.com/in/maylin-calva
7. The internet and the Price:
Consumer and Price
1. Lower-bound price
2. Competitor prices
3. Expected future price
4. Usual discounted price
How to read Customer mind:
www.linkedin.com/in/maylin-calva
8. The internet and the Price:
Consumer and Price
1. Lower-bound price
2. Competitor prices
3. Expected future price
4. Usual discounted price
How to read Customer mind:
www.linkedin.com/in/maylin-calva
9. The internet and the Price:
Customer and Price
Tiers in Pricing
www.linkedin.com/in/maylin-calva
10. Understanding Pricing:
Making the Price Right
Steps to make a right pricing:
1 Select the price objective
2 Determine demand
3. Estimate costs
4. Analyze competitor price mix
5. Select pricing method
6. Select final price
www.linkedin.com/in/maylin-calva
11. (1) Selecting the Pricing Objective
Making the Price Right
Steps to make a right pricing:
1. Survival
2. Maximum current profit
3. Maximum market share
4. Maximum market skimming
5. Product-quality leadership
www.linkedin.com/in/maylin-calva
12. (2) Determining Demand
Making the Price Right
Steps to make a right pricing:
1. Price sensitivity
2. Estimate demand curves
3. Price elasticity of demand
www.linkedin.com/in/maylin-calva
13. (2) Determining Demand
Making the Price Right
Figure 14.1 Inelastic and Elastic Demand
www.linkedin.com/in/maylin-calva
14. (2) Determining Demand
Making the Price Right
1. The product is more distinctive
2. Buyers are less aware of substitutes
3. Buyers cannot easily compare the quality of substitute
4. Expenditure is a smaller part of buyer’s total income
5. Expenditure is small compared to the total cost
6. Part of the cost is paid by another party
7. Product is used with previously purchased assets
8. Product is assumed to have high quality and prestige
9. Buyers cannot store the product
www.linkedin.com/in/maylin-calva
15. (3) Estimating Cost
Making the Price Right
1. Types of costs
2. Accumulated production
3. Activity-based cost accounting
4. Target costing
www.linkedin.com/in/maylin-calva
16. (3) Estimating Cost
Making the Price Right
Figure 14.2 Cost Per Unit at Different Levels of Production
www.linkedin.com/in/maylin-calva
17. (3) Estimating Cost
Making the Price Right
Cost Terms and Production
1. Fixed costs
2. Variable costs
3. Total costs
4. Average cost
5. Cost at different levels of production
www.linkedin.com/in/maylin-calva
18. (3) Estimating Cost
Making the Price Right
Cost per Unit as a Function of Accumulated Production
www.linkedin.com/in/maylin-calva
21. (4) Analyzing Competitors Cost
Making the Price Right
The Three Cs Model for Price-Setting
www.linkedin.com/in/maylin-calva
22. (5) Selecting Price Model
Making the Price Right
1. Markup pricing
2. Target-return pricing
3. Perceived-value pricing
4. Value pricing
5. Going-rate pricing
6. Auction-type pricing
www.linkedin.com/in/maylin-calva
23. (5) Selecting Price Model
Making the Price Right
Break-Even Chart for Determining Target-Return
Price and Break-Even Volume
www.linkedin.com/in/maylin-calva
24. (5) Selecting Price Model
Making the Price Right
www.linkedin.com/in/maylin-calva
25. (5) Selecting Price Model
Making the Price Right
Auction-Type Pricing
English
Dutch
Sealed-Bid
www.linkedin.com/in/maylin-calva
26. (5) Selecting the Final Price
Making the Price Right
•Impact of other marketing activities
•Company pricing policies
•Gain-and-risk sharing pricing
•Impact of price on other parties
www.linkedin.com/in/maylin-calva
27. (5) Selecting the Final Price
Making the Price Right
Geographical Pricing
•Pricing varies by location
www.linkedin.com/in/maylin-calva
28. (5) Selecting the Final Price
Making the Price Right
Price Discounts and Allowances
1. Discount
2. Quantity discount
3. Functional discount
4. Seasonal discount
5. Allowance
www.linkedin.com/in/maylin-calva
29. (5) Selecting the Final Price
Making the Price Right
Promotional Pricing Tactics
1. Loss-leader pricing
2. Special-event pricing
3. Cash rebates
4. Low-interest financing
5. Longer payment terms
6. Warranties and service contracts
7. Psychological discounting
www.linkedin.com/in/maylin-calva
30. (5) Selecting the Final Price
Making the Price Right
Differentiated Pricing
1. Customer-segment pricing
2. Product-form pricing
3. Image pricing
4. Channel pricing
5. Location pricing
6. Time pricing
7. Yield pricing
www.linkedin.com/in/maylin-calva
31. (5) Selecting the Final Price
Making the Price Right
Traps in Price Cutting Strategies
1. Low-quality trap
2. Fragile-market-share trap
3. Shallow-pockets trap
4. Price-war trap
www.linkedin.com/in/maylin-calva
32. (5) Selecting the Final Price
Making the Price Right
Should We Raise Prices?
www.linkedin.com/in/maylin-calva
33. (5) Selecting the Final Price
Making the Price Right
Methods for Increasing Prices
1. Delayed quotation pricing
2. Escalator clauses
3. Unbundling
4. Reduction of discounts
www.linkedin.com/in/maylin-calva
34. (5) Selecting the Final Price
Making the Price Right
1. Maintain price
2. Maintain price and add value
3. Reduce price
4. Increase price and improve quality
5. Launch a low-price fighter line
Brand Leader Responses to Competitive Price Cuts
www.linkedin.com/in/maylin-calva
37. Summary
1. How do consumers process and evaluate prices?
Price remains a critical element of marketing.
It is the only element that produces revenue.
Pricing decisions are due to changing economic
and technological environment.
38. Summary
2. How should a company set prices initially for products or
services? A company follows a (6) six step procedure.
(1) It selects its pricing objectives.
(2)It estimates the demand curve, the probable quantities
(3) It will sell at each possible price.
(4)It estimates how its costs vary at different levels of
output, at different levels of accumulated production
experience and for differentiated marketing offer.
(5) It examines competitors costs, prices and offers.
(6) It selects a pricing method and it selects the final price
www.linkedin.com/in/maylin-calva
39. Summary
3. How should a company adapt prices to meet varying
circumstances and opportunities?
Companies usually a set pricing structure that reflects
variations in geographical demand and costs,
market segment requirements, purchase timing,
order levels and other factors. There are 4 price-
adaptation strategies available:
(1) geographical pricing,
(2) price discounts and allowances
(3) promotional pricing
(4) discriminatory pricing.
www.linkedin.com/in/maylin-calva
40. Summary
4. When should a company initiate a price change?
Firms often need to change their prices. A price decrease
might be brought about by excess plant capacity,
declining market share, a desire to dominate the
market through lower costs or economic recession
A price increase might be brought about by cost inflation
or over demand. Companies must carefully manage
customer perceptions when raising price.
www.linkedin.com/in/maylin-calva
41. Summary
5. How should a company respond to a competitor’s price
challenge?
Firms often need to change their prices. A price decrease
might be brought about by excess plant capacity,
declining market share, a desire to dominate the
market through lower costs or economic recession
A price increase might be brought about by cost inflation
or over demand. Companies must carefully manage
customer perceptions when raising price.
www.linkedin.com/in/maylin-calva
42. Summary
6. How should a company respond to a competitor’s
price challenge?
Companies must anticipate competitor price changes
and prepare contingent responses. A number of
responses are possible in terms of maintaining or
changing price or quality
www.linkedin.com/in/maylin-calva