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  • Price ChangesThis CTR relates to the material on pp. 340-342.Initiating Price ChangesPrice changes may be initiated for several reasons, including:Price Cuts. Reasons for cutting prices may stem from overcapacity, falling market share, or attempts to dominate the market through lower costs.Price Increases. Inflation is a major source of price increases but so is the tendency to speculate on inflationary trends and raise prices beyond the rate of inflation. Over demand may also cause prices to rise. Higher prices can also increase profit margins.Buyer Reactions to Price Changes. Buyer reactions usually respond directly to price changes but not always. Usually lower prices pleases consumers, higher prices do not. But sometimes higher prices support quality improvements and lower prices mean company or product problems. Whether the buyer is correct or not in these perceptions will not immediately change their inclination to act on them.Competitor Reactions to Price Changes. Competitors most often react in industries with a small number of firms, uniform products in the market, and buyers are well informed. Competitive reactions may be similar price changes or increased non price competition. Companies should anticipate probable competitive moves prior to initiating price changes.
  • Marketing

    1. 1. Pricing products Group members: Pham Thi Hue Nguyen Lan Anh Phan Thi Thu Hien Hoang Thuy Duong
    2. 2. outline Factors affecting setting prices I. General pricing approaches II. New product pricing strategies III. Products mix pricing strategies IV. Price-adjustment strategies V. Price changes VI.
    3. 3. Factors to consider when setting prices 1. Internal a. Marketing Objectives b. Marketing mix strategy c. Costs d. Organizational considerations 2. External a. Market & demand b. Competition c. Environmental elements
    4. 4. Internal a. Marketing Objectives Survival  Current profit maximization  Market share leadership  Product quality leadership 
    5. 5. Product quality leadership:  Viettel telecom One of three big people in Telecommunication technology with price and promotion campaign. Easy to use.
    6. 6. One of three big people in Telecommunicaton  technology with Cheap price and broad and regular promotion  campaign Good caring customer services  Have the largest mobile users  Convenient and guarantees  Social activites: free mobile phone for new  graduating students
    7. 7. competition
    8. 8. price and demand
    9. 9. II. General pricing approaches Cost-based pricing  Value-based pricing Competition-based pricing
    10. 10. Cost-based pricing Cost-plus pricing: adding a standard markup to the cost  of the product. unit cost=variable cost+ fixed cost/unit sales. Markup price=unit cost/(1-desired return on sales) Breakeven pricing: at the price it can break even  Breakeven volume=fixed cost/(price- variable cost)
    11. 11. Value-based pricing Based on buyers’ perceptions of value
    12. 12. Cost-based vs value-based Cost-based pricing  product cost price value customers Value-based pricing  customers value price cost product
    13. 13. Competition-based pricing Going-rate pricing  following competitors' prices  Sealed-bid pricing how the firm thinks competitors will price
    14. 14. New product pricing strategies Market skimming pricing  Market penetration pricing 
    15. 15. Market skimming vs market penetration strategies Market skimming Market penetration -Setting a very high price -Setting a low price -Conditions: -Conditions: + high quality and image +market is highly price sensitive +cost for small volume is not so high +production and distribution costs fall when + position of competitor sales volume increase +position of competitor
    16. 16. Product-mix pricing strategies Product line pricing  Optional-product pricing  Captive-product pricing  By-product pricing  Product-bundle pricing 
    17. 17. Price- Adjustment Strategies Discount and allowance pricing Segmented International pricing pricing + Strategies Psychological Geographical pricing pricing Value Promotional pricing pricing
    18. 18. Discount and Allowance pricing Reducing prices to reward customer responses reducing prices to buyers who Cash Discount pay their bills promptly reducing prices to buyers who buy large volumes Quantity Discount reducing prices to trade channel members who perform certain Functional Discount functions reducing prices to buyers who buy merchandise or services out of Seasonal Discount season promotional money for an agreement to feature products in Allowance some ways
    19. 19. Customer- segment pricing Different customers pay different prices for the same product or service Product-form pricing Different versions of the product are priced Segmented differently Pricing Location pricing Different locations are priced differently even though the cost is the same Time pricing Prices vary by the season, the month, the day, and even the hour
    20. 20. Psychological Pricing A pricing approach that considers the psychological of prices and not simply the economics. The price is used to say something about the product + Price-quality relationship + Reference prices: Prices that buyers carry in their minds and refer to when looking at a given product
    21. 21. Promotional Pricing Temporarily pricing products below the list price and sometimes even below cost, to increase short-run sales + Loss leaders + Special-event pricing + Cash rebates + Low-interest financing, longer warranties, free maintenance
    22. 22. Value Pricing Finding the delicate balance between the price and quality that gives consumers the value they seek +“Value” is not the same as “cheap” + Value pricing requires price cutting coupled with finding ways to maintain or even improve quality while still making a profit
    23. 23. Geographical pricing + FOB-origin pricing + Uniform-delivered pricing + Zone pricing + Basing-point pricing + Freight-absorption pricing
    24. 24. International Pricing Prices charged in a specific country depend on many factors + Economic conditions + Competitive situation + Laws / regulations + Distribution system + Consumer perceptions + Cost considerations
    25. 25. Competitor Initiating Reactions Price Cuts To Price Changes Price Changes Buyer Initiating Reactions Price to Price Increases Changes
    26. 26. Initiating price increases Circumstances: 2. Cost inflation  Over demand  2. Bad effects: resented by customers, dealers, sales force If succeed: great profit Ways 7. Invisible  Push up openly 
    27. 27. Increases  Lower sales  Product hot->buy soon  Unusually good value  Company is greedy
    28. 28. Example of legal &illegal price promotional pricing
    29. 29. No Has Competitor Cut Hold Current Price; Price? Continue to Monitor Competitor’s Price. No Will Lower Price Negatively Affect Our Market Share & Profits? Reduce Price Raise Perceived No Quality Can/ Should Effective Improve Quality Action be Taken? & Increase Price Yes Launch Low-Price “Fighting Brand”
    30. 30. Responding to price changes Q of price changes  Why change?  What happen to company MS & profit if not respond? Analysis  Own product’s stage in life cycle, importance in product’s mix, intentions & resources of company, possible customers reactions