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Slide 10.1
Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013...
Slide 10.2
Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Pricing strategies: unders...
Slide 10.3
Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Price is the amount of mon...
Slide 10.4
Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Price is the only element ...
Slide 10.5
Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Fixed costs (overheads) a...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Major pricing strategies
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Target costing starts wit...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Organisational considerat...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Other internal and extern...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Pure competition
Monopoli...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
The demand curve shows th...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Figure 10.6 Demand curves...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Price elasticity of deman...
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Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Price elasticity of deman...
Slide 10.32
Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013
Economic conditions
Resel...
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PoM 6th ed. chapter 10

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Pricing strategies: understanding and capturing customer value

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PoM 6th ed. chapter 10

  1. 1. it’s good and good for you Slide 10.1 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Chapter 10 Pricing strategies: understanding and capturing customer value
  2. 2. Slide 10.2 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Pricing strategies: understanding and capturing customer value • What is a price? • Major pricing strategies • Other internal and external considerations affecting price decisions Topic outline
  3. 3. Slide 10.3 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Price is the amount of money charged for a product or service; the sum of the values that consumers exchange for the benefits of having or using the product or service. What is a price?
  4. 4. Slide 10.4 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Price is the only element in the marketing mix that produces revenue; all other elements represent costs. What is a price? (Continued)
  5. 5. Slide 10.5 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies Figure 10.1 Considerations in setting price
  6. 6. Slide 10.6 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value. Customer value-based pricing
  7. 7. Slide 10.7 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Value-based pricing uses the buyers’ perceptions of value, not the sellers cost, as the key to pricing. Price is considered before the marketing program is set. • Value-based pricing is customer driven. • Cost-based pricing is product driven. Customer value-based pricing
  8. 8. Slide 10.8 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Value-based pricing versus cost-based pricing Figure 10.2 Value-based pricing versus cost-based pricing
  9. 9. Slide 10.9 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Good-value pricing offers the right combination of quality and good service at a fair price. Customer value-based pricing
  10. 10. Slide 10.10 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts. Customer value-based pricing
  11. 11. Slide 10.11 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) High–low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. Customer value-based pricing
  12. 12. Slide 10.12 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Value-added pricing attaches value-added features and services to differentiate a company’s offers and charging higher prices. Customer value-based pricing
  13. 13. Slide 10.13 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Cost-based pricing involves setting prices based on the costs for producing, distributing and selling the product plus a fair rate of return for effort and risk. Cost-based pricing
  14. 14. Slide 10.14 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Fixed costs Variable costs Total costs Cost-based pricing Types of costs
  15. 15. Slide 10.15 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Fixed costs (overheads) are the costs that do not vary with production or sales level. – Rent – Heat – Interest – Executive salaries Cost-based pricing Major pricing strategies (Continued)
  16. 16. Slide 10.16 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Variable costs are the costs that vary directly with the level of production. – Packaging – Raw materials Cost-based pricing
  17. 17. Slide 10.17 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Total costs are the sum of the fixed and variable costs for any given level of production. Cost-based pricing
  18. 18. Slide 10.18 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Costs as a function of production experience Figure 10.3 Cost per unit at different levels of production per period
  19. 19. Slide 10.19 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Experience or learning curve is when average cost falls as production increases because fixed costs are spread over more units. Costs as a function of production experience Figure 10.4 Cost per unit as a function of accumulated production: the experience curve
  20. 20. Slide 10.20 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) • Cost-plus pricing adds a standard markup to the cost of the product. • Benefits – Sellers are certain about costs. – Prices are similar in industry and price competition is minimised. – Buyers feel it is fair. • Disadvantages – Ignores demand and competitor prices. Cost-plus pricing
  21. 21. Slide 10.21 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Break-even pricing is the price at which total costs are equal to total revenue and there is no profit. Target profit pricing is the price at which the firm will break even or make the profit it’s seeking. Break-even analysis and target profit pricing
  22. 22. Slide 10.22 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) Break-even analysis and target profit pricing Figure 10.5 Break-even chart for determining target-return price and break-even volume
  23. 23. Slide 10.23 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Major pricing strategies (Continued) • Setting prices based on competitors’ strategies, prices, costs and market offerings. • Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products. Competition-based pricing
  24. 24. Slide 10.24 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Target costing starts with an ideal selling price and then targets costs that will ensure that the price is met. Other internal and external considerations affecting price decisions
  25. 25. Slide 10.25 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Organisational considerations include: • Who should set the price? • Who can influence the prices? Other internal and external considerations affecting price decisions (Continued)
  26. 26. Slide 10.26 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Other internal and external considerations affecting price decisions (Continued) Before setting prices, the marketer must understand the relationship between price and demand for its products. The market and demand
  27. 27. Slide 10.27 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Pure competition Monopolistic competition Oligopolistic competition Pure monopoly Competition Other internal and external considerations affecting price decisions (Continued)
  28. 28. Slide 10.28 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 The demand curve shows the number of units the market will buy in a given period at different prices. • Normally, demand and price are inversely related. • Higher price = lower demand. • For prestige (luxury) goods, higher price can equal higher demand when consumers perceive higher prices as higher quality. Other internal and external considerations affecting price decisions (Continued)
  29. 29. Slide 10.29 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Figure 10.6 Demand curves Other internal and external considerations affecting price decisions (Continued)
  30. 30. Slide 10.30 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Price elasticity of demand illustrates the response of demand to a change in price. Inelastic demand occurs when demand hardly changes when there is a small change in price. Elastic demand occurs when demand changes greatly for a small change in price. Other internal and external considerations affecting price decisions (Continued)
  31. 31. Slide 10.31 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Price elasticity of demand = % change in quantity demand % change in price Other internal and external considerations affecting price decisions (Continued)
  32. 32. Slide 10.32 Kotler et al., Principles of Marketing, 6th edition © Pearson Education Limited 2013 Economic conditions Reseller’s response to price Government Social concerns Other internal and external considerations affecting price decisions (Continued)

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