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Principles of Marketing - Pricing Strategies- Ch-11


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Prepared for a presentation of our course Principles of Marketing (321)

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Principles of Marketing - Pricing Strategies- Ch-11

  1. 1. Principles of Marketing Chapter Eleven: Pricing Strategies
  2. 2. Principle of Marketing [Course Code # 321] Team SPLENDID BBA 19th Batch Department of Marketing University of Dhaka
  3. 3. Market-skimming pricing Market-penetration pricing
  4. 4. Market-skimming pricing Setting a relatively high price during the initial stage of a product’s life cycle Buyers must want the product at the price
  5. 5. Market-Skimming Pricing High price high quality. For Example iPhone uses marketing Skimming.
  6. 6. Market-penetration pricing Setting a relatively low price during the initial stage of a product’s life cycle. Increases its price as its demands in the market increases.  Good to capture new market  Opposite of skimming
  7. 7. Product Mix Pricing Strategies Product line pricing takes into account the cost differences between products in the line, customer evaluation of their features, and competitors’ prices. Optional product pricing takes into account optional or accessory products along with the main product.
  8. 8. Involves products that must be used along with the main product Two-part pricing Involves breaking the price into: p Fixed fee p Variable usage fee Captive Pricing
  9. 9. By-product pricing By-product pricing refers to products with little or no value produced as a result of the main product. Producers will seek little or no profit other than the cost to cover storage and delivery. Product bundle pricing Product bundle pricing combines several products at a reduced price Pricing Strategies
  10. 10. Price Adjustment Strategies • Discount and allowance pricing • Segmented pricing • Psychological pricing • Promotional pricing • Geographical pricing • Dynamic pricing • International pricing 11-12
  11. 11. 11-10
  12. 12. Combines several products at a reduced price 11-11 Product bundle pricing
  13. 13. Discount and allowance pricing reduces prices to reward customer responses such as paying early or promoting the product • Discounts • Allowances 11-13 Discount and allowance pricing
  14. 14. • Discounts • Cash discount for paying promptly • Quantity discount for buying in large volume • Functional (trade) discount for selling, storing, distribution, and record keeping 11-14
  15. 15. • Allowances • Trade in allowance for turning in an old item when buying a new one • Promotional allowance to reward dealers for participating in advertising or sales support programs 11-15
  16. 16. Segmented pricing is used when a company sells a product at two or more prices even though the difference is not based on cost • Customer segment pricing • Product form segment pricing • Location pricing 11-16
  17. 17. Customer segment pricing is when different customers pay different prices for the same product or service Product form segment pricing is when different versions of the product are priced differently but not according to differences in cost Location pricing is when the product is sold in different geographic areas and priced differently in those areas, even thought the cost is the same Time Pricing is different types of price at different time period 11-18 Segmented pricing
  18. 18. Psychological pricing Psychological pricing occurs when sellers consider the psychology of prices and not simply the economics • Reference prices are prices that buyers carry in their minds and refer to when looking at a given product 11-20
  19. 19. Promotional pricing Promotional pricing is when prices are temporarily priced below list price or cost to increase demand • Loss leaders • Special event pricing • Cash rebates • Low interest financing • Longer warrantees • Free maintenance 11-21
  20. 20. Promotional pricing Loss leaders are products sold below cost to attract customers in the hope they will buy other items at normal markups Special event pricing is used to attract customers during certain seasons or periods Cash rebates are given to consumers who buy products within a specified time Low interest financing, longer warrantees, and free maintenance lower the consumer’s “total price” 11-22
  21. 21. Risks of promotional pricing • Used too frequently, and copies by competitors can create “deal-prone” customers who will wait for promotions and avoid buying at regular price • Creates price wars 11-23
  22. 22. Geographical pricing Geographical pricing is used for customers in different parts of the country or the world • FOB pricing • Uniformed delivery pricing • Zone pricing • Basing point pricing • Freight absorption pricing 11-24
  23. 23. Geographical pricing FOB (free on board) pricing means that the goods are delivered to the carrier and the title and responsibility passes to the customer Uniformed delivery pricing means the company charges the same price plus freight to all customers, regardless of location 11-25
  24. 24. Geographical pricing Zone pricing means that the company sets up two or more zones where customers within a given zone pay a single total price Basing point pricing means that a seller selects a given city as a “basing point” and charges all customers the freight cost associated from that city to the customer location regardless of the city from which the goods are actually shipped 11-26
  25. 25. Geographical pricing Freight absorption pricing means the seller absorbs all or part of the actual freight charge as an incentive to attract business in competitive markets 11-27
  26. 26. • Dynamic pricing 11-28
  27. 27. International pricing
  28. 28. Price Changes
  29. 29. Price increases • Product is “hot” • Company greed
  30. 30. Price cuts • New models will be available • Models are not selling well • Quality issues
  31. 31. Price Changes Responding to Price Changes
  32. 32. 11-33 Public Policy and Pricing  Price-fixing ◦ Competitors cannot work with each other to set prices  Price discrimination ◦ Customers must be offered proportionally equal discounts when used  Deceptive pricing ◦ Cannot mislead customers as to value received.
  33. 33. 11-34 Ethical Issues in Pricing  Compliance with the law is the minimum standard when judging whether pricing practices are ethical  Can consumers understand prices and compare them?  Consumers are unaware they can negotiate some prices  Ability to negotiate prices