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Chapter 14 dps

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Chapter 14 dps

  1. 1. DEVELOPING PRICING STRATEGIES AND PROGRAMS Shelle Caiga MBA Standard May 11, 2012 yourwebsite.com www.
  2. 2. Outline: Developing Pricing Strategies and ProgramsI. Consumer Psychology and PricingII. Steps in Setting PriceIII. Learning what Price Adaptation is all about.IV. Promotional Pricing TacticsV. Differentiated PricingVI. Increasing PricesVII. Brand Leader Responses To Competitive Price Cuts yourwebsite.com www.
  3. 3. How do consumers process & evaluate prices? process prices evaluate yourwebsite.com www.
  4. 4. CONSUMER PSYCHOLOGY and PRICING REFERENCE PRICES PRICE-QUALITY INFERENCES PRICE ENDINGS PRICE CUES yourwebsite.com www.
  5. 5. Definition of Terms:CONSUMER PSYCHOLOGY: providesopportunities to examine issues such as what factors are mostimportant… when people decide to purchase a particular item how customers determine the value of a service and whether or not television & magazine advertisements can convince a reluctant consumer to try a new product for the 1st time.PRICING: is the process of determining what a company will receive in exchange for its products www. yourwebsite.com
  6. 6. REFERENCE PRICES… is a strategy in which a product is sold at a price justbelow its main competing brand. is one component of psychological pricing – sellersconsider the psychology of prices & not simply theeconomics. are prices that buyers carry in their minds and refer towhen looking at a given product. www.yourwebsite.com
  7. 7. PRICE CUESWhen to use… Customers purchase item infrequently Customers are new Product designs vary over time Prices vary seasonally Quality or sizes vary across stores yourwebsite.com www.
  8. 8. How should a company set prices for products or services?STEPS: 1) Select the PRICE OBJECTIVE 2) Determine DEMAND 3) Estimate COSTS 4) Analyze competitor PRICE MIX 5) Select PRICING METHOD 6) Select FINAL PRICE yourwebsite.com www.
  9. 9. I. SELECT THE PRICE OBJECTIVE  Survival  Maximum current profit  Maximum market share  Maximum market skimming  Product – quality leadership yourwebsite.com www.
  10. 10. II. DETERMINE DEMAND Price sensitivity Estimating demand curves Price elasticity of demand www.yourwebsite.com
  11. 11. III. ESTIMATE COSTS  Types of Costs  Accumulated Production  Activity – based Cost Accounting  Target Costing yourwebsite.com www.
  12. 12. IV. ANALYZE COMPETITOR PRICE MIX Identify nearest pricecompetitors Take competitor’s features andprices into account Make decision to charge more,the same or less than competitors Monitor competitors’ reaction toyour pricing strategy www. yourwebsite.com
  13. 13. V. SELECT PRICING METHOD  Mark up Pricing  Target-return pricing  Perceived-value pricing  Value pricing  Going-rate pricing  Auction-type pricing yourwebsite.com www.
  14. 14. VI. SELECT THE FINAL PRICE Impact of other marketingactivities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties yourwebsite.com www.
  15. 15. PRICE-ADAPTATION STRATEGIES GEOGRAPHICAL PRICING DISCOUNTS / ALLOWANCES PROMOTIONAL PRICING DIFFERENTIATED PRICING yourwebsite.com www.
  16. 16. PRICE-ADAPTATION STRATEGIES COUNTERTRADE Barter Compensation deal Buyback arrangement Offset yourwebsite.com www.
  17. 17. PRICE-ADAPTATION STRATEGIES DISCOUNTS / ALLOWANCES Cash Discount  Seasonal Discount Quantity Discount  Allowance Functional Discount yourwebsite.com www.
  18. 18. PROMOTIONAL PRICING TACTICS Loss-leader pricing  Longer payment terms Special-event pricing  Warranties & service contracts Low-interest financing  Cash Rebates  Psychological discounting www. yourwebsite.com
  19. 19. DIFFERENTIATED PRICING & PRICE DISCRIMINATION Customer-segment pricing  Channel pricing Product-form pricing  Location pricing Image pricing  Time pricing  Yield pricing yourwebsite.com www.
  20. 20. INCREASING PRICES Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts yourwebsite.com www.
  21. 21. BRAND LEADER RESPONSES TO COMPETITIVE PRICE CUTS Maintain price Maintain price & add value Reduce price Increase price & improve qualityLaunch a low-price fighter line yourwebsite.com www.
  22. 22. DEVELOPING PRICING STRATEGIES AND PROGRAMS Shelle Caiga MBA Standard May 11, 2012 yourwebsite.com www.

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