COSLA CH 14 Developing Pricing Strategies & Programs V79 Robelyn Jugo
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An assignment submission for Marketing Management (MARKMA) Class with the COSLA template and technique format. This is submitted to Coach Bong De Ungria solely for class presentation.
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COSLA CH 14 Developing Pricing Strategies & Programs V79 Robelyn Jugo
- 1. Creative presentation template Creativepresentationtemplate Maria Robelyn Anne A. Jugo Ateneo Graduate School of Business A good company knows the importance of preserving the integrity of its prices DEVELOPING PRICING STRATEGIES & PROGRAMS Marketing Management https://www.linkedin.com/in/robelynjugo/
- 2. Consumers’ means of processing & evaluating prices 1 Ways of setting initial prices for products & services2 Ways to adapt prices to meet varying circumstances & opportunities3 Chapter Questions This presentation aims to answer… Initiating price change4 Ways to respond to competitors’ price change5
- 3. Presentation Outline This presentation aims to discuss… Consumers’ means of processing & evaluating prices: a) previous purchase experience, b) formal communication, c) informal communication, d) on-line sources 1 Ways of setting initial prices for products & services: a) select objective, b) determine demand, c) estimate costs, d) analyze competitors’ costs, prices & offers, e) select pricing method, f) select final price 2 Ways to adapt prices to meet varying circumstances & opportunities: a) geographical pricing, b) price discounts & allowances, c) promotional pricing, d) differential pricing 3 Initiating price changes: a) Price Cuts, b) Price Increases4 Ways to respond to competitors’ price changes: Varies if a) homogenous product, b) non-homogenous product, c) brand leader5
- 4. Creative presentation template Creativepresentationtemplate GROUPLIFEWhat is Price? • Price produces revenue • It is the easiest element of the marketing program to adjust • It communicates intended product value positioning • It has operated as a major determinant of buyer choice.
- 5. Creative presentation template Creativepresentationtemplate GROUPLIFEHOW DO CONSUMERS EVALUATE PRICES? Consumers’ means of processing & evaluating prices Formal Communica- tion Previous Purchase Experience Informal Communi- cation Point of Purchase or On-line Sources They determine via…
- 6. Creative presentation template Creativepresentationtemplate GROUPLIFESETTING THE PRICE Ways of setting initial prices for products & services 1) Select Objective 2) Determine Demand 3) Estimate Costs 4) Analyze Competitors’ Costs, Prices & Offers 5) Select Pricing Method 6) Select Final Price
- 7. Creative presentation template Creativepresentationtemplate GROUPLIFEStep 1: Selecting the Pricing Objective Ways of setting initial prices for products & services Pricing Objective can be… Survival Maximum Current Profit Maximum Market Share Maximum Market Skimming Product-Quality Leadership
- 8. Creative presentation template Creativepresentationtemplate Step 2: Determining Demand Ways of setting initial prices for products & services The lower the demand The higher the price
- 9. Creative presentation template Creativepresentationtemplate Price Sensitivity Ways of setting initial prices for products & services Price is less sensitive when… Few substitutes or competitors Do not readily notice the higher price Slow changing buying habits Higher prices are justified Price is a small part of the total product cost
- 10. Creative presentation template Creativepresentationtemplate Elasticity of Demand Ways of setting initial prices for products & services
- 11. Creative presentation template Creativepresentationtemplate Step 3: Estimating Costs Ways of setting initial prices for products & services VARIABLE COSTS TOTALCOSTS AVERAGE COSTS FIXEDCOSTS
- 12. Creative presentation template Creativepresentationtemplate Step 4: Analyzing Competitor’s Costs Prices and Offers Ways of setting initial prices for products & services Whether or not the product has more or less value If for market share then competitor may reduce prices If for profit maximization then competitor may increase advertising costs or improve product quality
- 13. Creative presentation template Creativepresentationtemplate Step 5: Selecting a Pricing Method Ways of setting initial prices for products & services Target-Return Pricing Value Pricing Auction Type PricingGoing-Rate Pricing Perceived Value Pricing Mark-up Pricing
- 14. Creative presentation template Creativepresentationtemplate Step 5: Selecting a Pricing Method Ways of setting initial prices for products & services Target-Return Pricing Value Pricing Auction Type Pricing Going- Rate Pricing Perceived Value Pricing Mark-up Pricing
- 15. Creative presentation template Creativepresentationtemplate Step 6: Selecting the Final Price Ways of setting initial prices for products & services Should Consider… Mercury Drug vs. Generic Drugstores Bank’s Earlier Withdrawal Fees Pizzahut Dealers, Customers, Suppliers and Government Regulators Impact of other Marketing Activities Company Pricing Policies Gain-and-Risk Sharing Pricing Impact of Price on Other Parties
- 16. Creative presentation template Creativepresentationtemplate ADAPTING THE PRICE Ways to adapt prices to meet varying circumstances & opportunities Should Consider… Geographical Pricing Price Discounts & Allowances Promotional Pricing Differentiated Pricing TARGETING 89% STRATEGY 43% PROFIT 56% GOAL 43%
- 17. Creative presentation template Creativepresentationtemplate a) Geographical Location Ways to adapt prices to meet varying circumstances & opportunities Practice of countertrade… Philipp ines 1. Barter 2. Compensation Deal 3. Buy-back Arrangement 4. Offset
- 18. Creative presentation template Creativepresentationtemplate b) Price Discounts & Allowances Ways to adapt prices to meet varying circumstances & opportunities Has different kinds… Discounts Quantity Discounts Functional Discounts Seasonal Discounts Allowance
- 19. Creative presentation template Creativepresentationtemplate GROUPLIFE Loss Leader Pricing Special Event Pricing Special Customer Pricing c) Promotional Pricing Ways to adapt prices to meet varying circumstances & opportunities Has different kinds… Cash Rebates
- 20. Creative presentation template Creativepresentationtemplate d) Differential Pricing Ways to adapt prices to meet varying circumstances & opportunities Should Consider… Depends on the intensity of demand 1st degree Seller charges less to buyers of large volumes 2nd degree Customer Segment Pricing, Product-form Pricing, Image Pricing, Channel Pricing, Location Pricing, Time Pricing 3rd degree
- 21. Creative presentation template Creativepresentationtemplate Third Degree Price Discrimination Ways of setting initial prices for products & services Comes in different forms… Customer Segment Pricing Product Form Pricing Image Pricing Channel Pricing Location Pricing Time Pricing
- 22. Creative presentation template Creativepresentationtemplate Initiating Price Cuts Initiating Price Change Excess Plant Capacity Drive to Dominate Market through Lower Costs Why are there price cuts… A price-cutting strategy can lead to: • Low-quality trap • Fragile-market-share trap • Shallow-pockets trap • Price-war trap
- 23. Creative presentation template Creativepresentationtemplate Initiating Price Increases Initiating Price Change Methods of Price Increase are as follows… • Delayed Quotation Pricing • Escalator Clauses • Unbundling • Reduction of Discounts Why are there price increases… Cost Inflation Overdemand
- 24. Creative presentation template Creativepresentationtemplate RESPONDING TO COMPETITORS’ PRICE CHANGES Ways to respond to competitors’ price change Homogenous Products Non Homogenous Products Brand Leader
- 25. Creative presentation template Creativepresentationtemplate PUREGOLD Local Application Select Objectiv e Determin e Demand Estimate Costs Analyze Competit or Selecting Pricing Method Selectin g Final Price Maximum Market Share Value Pricing Customer LoyaltyElastic Demand FC – Building Rent VC – Salary Setting the Price…
- 26. Creative presentation template Creativepresentationtemplate Quantity Discounts, Promotional Pricing, Functional Discounts, Price Differential ADAPTING THE PRICE Price Cuts INITIATING PRICE CHANGE PUREGOLD Local Application Rebranding WAYS TO RESPOND TO COMPETITOR’S PRICE CHANGE
- 27. Consumers’ means of processing & evaluating prices 1 Ways of setting initial prices for products & services2 Ways to adapt prices to meet varying circumstances & opportunities3 Chapter Questions This presentation aims to answer… Initiating price change4 Ways to respond to competitors’ price change5
Editor's Notes
- Chapter Questions This presentation aims to answer: 1) Consumers means of processing and evaluating prices 2) Ways of setting initial prices for products and services 3) Ways to adapt prices to meet varying circumstances and opportunities 4) Initiating price change 5) Ways to respond to competitors' price change
- Chapter Questions This presentation aims to discuss: 1) Consumers means of processing and evaluating prices 2) Ways of setting initial prices for products and services 3) Ways to adapt prices to meet varying circumstances and opportunities 4) Initiating price change 5) Ways to respond to competitors' price change
- Price is the one element of the marketing mix that produces revenue It is the easiest element of the marketing program to adjust since product features, channels, and even communications take more time. It communicates to the market the company’s intended value positioning of its product It has operated as a major determinant of buyer choice.
- Consumers means of processing and evaluating prices they determine via previous purchase experience formal communication – e.g. advertisements informal communication – e.g. word of mouth point of purchase or online sources e.g. Lazada
- mistakes in pricing determine costs and take traditional margins not revising prices to capitalize on market changes setting price independently of the marketing program not varying prices to match different distribution channels, product items, market segments and purchase occasions when to price? when the product is new when product is being introduced to a new distribution channel or area when it enters bids on new contract work Ways of setting initial prices for products & services: select objective determine demand estimate costs analyze competitors’ costs, prices & offers select pricing method select final price
- survival maximum current profit maximum market share - if market is price sensitive and low price stimulates growth; production and distribution costs fall with actual experience; low price discourages market competition maximum market skimming - sufficient number of buyers have high current demand; unit cost of producing small volume is high enough to cancel the advantage of charging what the traffic will bear; high initial price does not attract more competitors to the market; high price communicates the image of a superior product product-quality leadership - affordable luxuries - starbucks others - partial cost recovery, full cost recovery, signals that they are getting sponsorships, strategy of just filling in all the seats in the theater
- The law of demand states that the higher the price the lower the quantity demanded
- Price is less sensitive when… a. there are few substitutes or competitors - meralco b. they do not readily notice the higher price c. they are slow to change their buying habits - addict of coke or someone who always has coke in their diet d. they think the higher prices are justified - meralco charges during summer cause you use too much aircon vs not using aircon and still having the same charge e. price is only a small part of total cost of obtaining, operating and servicing the product over its lifetime
- To illustrate better we have… a) Inelastic Demand – when a change in price does little change in quantity demanded. Goods are usually necessities b) Elastic Demand – when a change in price does a big change in quantity demanded. Goods are usually luxuries. estimating demand curve 1) surveys 2) price experiments - geographical areas with low cost of living vs high cost of living 3) statistical analysis elasticity of demand 1) price elasticity magnitude is higher for durable goods and for products in introduction / growth stages of product life cycle than in mature / decline stages 2) inflation leads to higher elasticity in the short run 3) promotional price elasticities are higher than actual price elasticities in the short run 4) price elasticities were higher for the individual item than for the over-all brand level
- Types of costs a) fixed or overhead costs b) variable costs total costs average costs
- analyzing competitor's costs, prices and offers adjust prices based on whether your product has more or less value than competitor's products adjust by knowing the objective - if for market share then competitor may reduce prices ; if for profit maximization then the competitor may increase advertising costs or improve product quality
- a. mark up pricing - identify the costs then add desired mark up/ profit mark-up higher for seasonal items, specialty items, slower-moving items, items with high storage and handling costs and demand inelastic items e.g. prescription drugs, mangoes if seasonal vs not seasonal advantages simplified pricing tasks used by most companies in the industry so it minimizes the competition is a fair method for both buyers and sellers b. target-return pricing - pricing based on a target return on investment disadvantage target demand is not always met - determined by getting the break even does not consider competitor's prices does not consider price elasticity of demand c. perceived value pricing based on buyer’s image of the product performance, the channel deliverables, the warranty quality, customer support, and softer attributes such as the supplier’s reputation, trustworthiness, and esteem. Firms use the other marketing program elements, such as advertising, sales force, and the Internet e.g. shoes such as nike vs normal department store sneakers - there is the impression of durability add framework of questions for value based pricing d. value pricing - They win loyal customers by charging a fairly low price for a high-quality offering. in daiso, miniso products are of quality but priced cheap Everyday low pricing - constant low price with little to no promotions High-low pricing - constant high price with promotions puregold - limited design, everyday cheap prices e. going-rate pricing - the firm bases its price largely on competitors’ prices. f. auction type pricing English Auction - or ascending bids - have one seller and many buyers. the highest bidder gets the item Dutch Auction - or descending bids - feature one seller and many buyers, or one buyer and many sellers. In the first kind, an auctioneer announces a high price for a product and then slowly decreases the price until a bidder accepts. In the other, the buyer announces something he or she wants to buy, and potential sellers compete to offer the lowest price. Sealed-Bid Auction - let would-be suppliers submit only one bid; they cannot know the other bids.
- a. mark up pricing - identify the costs then add desired mark up/ profit mark-up higher for seasonal items, specialty items, slower-moving items, items with high storage and handling costs and demand inelastic items e.g. prescription drugs, mangoes if seasonal vs not seasonal advantages simplified pricing tasks used by most companies in the industry so it minimizes the competition is a fair method for both buyers and sellers b. target-return pricing - pricing based on a target return on investment e.g. start-up companies disadvantage target demand is not always met - determined by getting the break even does not consider competitor's prices does not consider price elasticity of demand c. perceived value pricing based on buyer’s image of the product performance, the channel deliverables, the warranty quality, customer support, and softer attributes such as the supplier’s reputation, trustworthiness, and esteem. Firms use the other marketing program elements, such as advertising, sales force, and the Internet e.g. shoes such as nike vs normal department store sneakers - there is the impression of durability add framework of questions for value based pricing d. value pricing - They win loyal customers by charging a fairly low price for a high-quality offering. in daiso, miniso products are of quality but priced cheap Everyday low pricing - constant low price with little to no promotions High-low pricing - constant high price with promotions puregold - limited design, everyday cheap prices e. going-rate pricing - the firm bases its price largely on competitors’ prices. f. auction type pricing English Auction - or ascending bids - have one seller and many buyers. the highest bidder gets the item Dutch Auction - or descending bids - feature one seller and many buyers, or one buyer and many sellers. In the first kind, an auctioneer announces a high price for a product and then slowly decreases the price until a bidder accepts. In the other, the buyer announces something he or she wants to buy, and potential sellers compete to offer the lowest price. Sealed-Bid Auction - let would-be suppliers submit only one bid; they cannot know the other bids.
- 1) impact of other marketing activities - considers competitors' relative pricing, quality and advertising - the higher the quality and advertising especially for market leaders, the higher the price e.g. mercury drug and generic drugstores 2) company pricing policies - charge for refunds, early withdrawal fees, no show fees 3) gain-and-risk-sharing pricing - Buyers may resist accepting a seller’s proposal because of a high perceived level of risk. The seller has the option of offering to absorb part or all the risk if it does not deliver the full promised value. e.g. pizza hut- if your pizza is not hot then it's free 4) the impact of price on other parties - reaction of dealers, customers, suppliers and government regulators
- 1) geographical pricing - variations in pricing depending on the location practice of countertrade - offering of items as payment instead of plain cash a. Barter. The buyer and seller directly exchange goods, with no money and no third party in- volved. b. Compensation deal. The seller receives some percentage of the payment in cash and the rest in products. c. Buyback arrangement. The seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. d. Offset. The seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period. 2) price discounts and allowances a. discounts - reduction to those who pay bills promptly b. quantity discounts - reduction to those who buy large volumes c. functional discounts - also known as trade discount - offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and record keeping. d. seasonal discounts - price reduction to those who buy merchandise or services out of season. Hotels, motels, and airlines offer seasonal discounts in slow selling periods. e. allowance - An extra payment designed to gain reseller participation in special pro- grams. Trade-in allowances are granted for turning in an old item when buying a new one. e.g. apple and samsung products 3) promotional pricing • Loss-leader pricing. drop the price on well- known brands to stimulate additional store traffic. • Special event pricing. Sellers will establish special prices in certain seasons to draw in more customers. Every August, there are back-to-school sales. • Special customer pricing. Sellers will offer special prices exclusively to certain customers. • Cash Rebates - like in banks or online shopping • Low-interest financing. • Longer payment terms. Sellers, stretch loans over longer periods and thus lower the monthly payments. Consumers often worry less about the cost (the interest rate) of a loan, and more about whether they can afford the monthly payment. • Warranties and service contracts. • Psychological discounting. This strategy sets an artificially high price and then offers the product at substantial savings; "Was $359, now $299." 4) differentiated pricing. Price discrimination - when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. In first-degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his or her demand. In second-degree price discrimination, the seller charges less to buyers of larger volumes. In third degree price discrimination, charges depends on • Customer-segment pricing. Different customer groups pay different prices for the same product or service. eg. student and senior citizen price • Product-form pricing. Different versions of the product are priced differently, but not proportionately to their costs. • Image pricing. Some companies price the same product at two different levels based on image differences. • Channel pricing. Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine. • Location pricing. The same product is priced differently at different locations even though the cost of offering it at each location is the same e.g. theater seats • Time pricing. Prices are varied by season, day, or hour. e.g. weekday price of amusement park vs weekend price price discrimination works if: market can be segmentable to different intensities of demand members of lower price segment must not be able to resell the product to the higher price segment competitors must not be able to undersell the firm to the higher price segment cost must not exceed the revenue there must be no customer resentment price discrimination must not be illegal
- 1) geographical pricing - variations in pricing depending on the location practice of countertrade - offering of items as payment instead of plain cash a. Barter. The buyer and seller directly exchange goods, with no money and no third party in- volved. b. Compensation deal. The seller receives some percentage of the payment in cash and the rest in products. c. Buyback arrangement. The seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. d. Offset. The seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period.
- 2) price discounts and allowances a. discounts - reduction to those who pay bills promptly b. quantity discounts - reduction to those who buy large volumes c. functional discounts - also known as trade discount - offered by a manufacturer to trade-channel members if they will perform certain functions, such as selling, storing, and record keeping. d. seasonal discounts - price reduction to those who buy merchandise or services out of season. Hotels, motels, and airlines offer seasonal discounts in slow selling periods. e. allowance - An extra payment designed to gain reseller participation in special pro- grams. Trade-in allowances are granted for turning in an old item when buying a new one. e.g. apple and samsung products
- 3) promotional pricing • Loss-leader pricing. drop the price on well-known brands to stimulate additional store traffic. • Special event pricing. Sellers will establish special prices in certain seasons to draw in more customers. Every August, there are back-to-school sales. • Special customer pricing. Sellers will offer special prices exclusively to certain customers. • Cash Rebates - like in banks or online shopping • Low-interest financing. • Longer payment terms. Sellers, stretch loans over longer periods and thus lower the monthly payments. Consumers often worry less about the cost (the interest rate) of a loan, and more about whether they can afford the monthly payment. • Warranties and service contracts. • Psychological discounting. This strategy sets an artificially high price and then offers the product at substantial savings; "Was $359, now $299."
- 4) differentiated pricing. Price discrimination - when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. In first-degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his or her demand. In second-degree price discrimination, the seller charges less to buyers of larger volumes.
- In third degree price discrimination, charges depends on • Customer-segment pricing. Different customer groups pay different prices for the same product or service. eg. student and senior citizen price • Product-form pricing. Different versions of the product are priced differently, but not proportionately to their costs. • Image pricing. Some companies price the same product at two different levels based on image differences. • Channel pricing. Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine. • Location pricing. The same product is priced differently at different locations even though the cost of offering it at each location is the same e.g. theater seats • Time pricing. Prices are varied by season, day, or hour. e.g. weekday price of amusement park vs weekend price price discrimination works if: market can be segmentable to different intensities of demand members of lower price segment must not be able to resell the product to the higher price segment competitors must not be able to undersell the firm to the higher price segment cost must not exceed the revenue there must be no customer resentment price discrimination must not be illegal
- Why there are price cuts? Excess plant capacity: The firm needs additional business and cannot generate it through increased sales effort, product improvement, or other measures. Drive to dominate the market through lower costs. Either the company starts with lower costs than its competitors, or it initiates price cuts in the hope of gaining market share and lower costs. A price-cutting strategy can lead • Low-quality trap. • Fragile-market-share trap. A low price buys market share but not market loyalty. • Shallow-pockets trap. Higher-priced competitors match the lower prices but have longer staying power because of deeper cash reserves. • Price-war trap. Competitors respond by lowering their prices even more
- due to: cost inflation anticipatory pricing - possible increase in cost Overdemand It can increase price in the following ways: • Delayed quotation pricing. The company does not set a final price until the product is finished or delivered. e.g. heavy equipment. • Escalator clauses. The company requires the customer to pay today’s price and all or part of any inflation increase that takes place before delivery. • Unbundling. The company maintains its price but removes or prices separately one or more elements that were part of the former offer, such as free delivery or installation. • Reduction of discounts. The company instructs its sales force not to offer its normal cash and quantity discounts.
- Ways to respond to competitors' price change high product homogeneity, the firm can search for ways to enhance its augmented product. If it cannot find any, it may need to meet the price reduction. If the competitor raises its price in a homogeneous product market, other firms might not match it if the increase will not benefit the industry as a whole. Then the leader will need to roll back the increase. non-homogenous product markets, a firm has more latitude. It needs to consider the following issues: 1) Why did the competitor change the price? To steal the market, to utilize excess capacity, to meet changing cost conditions, or to lead an industry-wide price change? 2) Does the competitor plan to make the price change temporary or permanent? 3) What will happen to the company’s market share and profits if it does not respond? Are other companies going to respond? 4) What are the competitors’ and other firms’ responses likely to be to each possible reaction? Brand leaders also face lower-priced store brands. Three possible responses to low-cost competitors are: a) further differentiate the product or service b) introduce a low-cost venture c) reinvent as a low-cost player
- Now that we finished discussing the different concepts related to developing pricing strategies and programs, in the next slides, we will make use of a local company in order to illustrate what we have learned so far. I chose Puregold. Puregold is one of the top supermarkets in the country. It was incorporated in 1998 and started first as a hypermarket store in Mandaluyong City. It currently has a total of 329 stores nationwide. It is owned by Cosco Capital which also runs S&R and Office Warehouse in the Philippines. Puregold’s target market is the less affluent. Upon this consideration, we began with setting the price. Its objective is to maximize market share. Thus it focused on having its prices lowered in contrast to its competitors during its start-up stages. Next step of price setting is determination of demand. Although puregold is comprised of commodities which maybe considered as necessities, the supermarket business generally have a lot of substitutes so a change in price is usually noticeable especially with its target market of less affluent masses. Price is a big part of total cost of operating its business in its lifetime so it is elastic. Next step is estimation of costs. Its costs are consist of building rent and employee salary. After this we analyze competitor’s costs, prices and offers. Among its competitors are SM Supermarket and Robinsons Supermarket. For this example, we will just focus on SM Supermarket as its main competitor. Upon the entry of Puregold in the industry, it lowered its prices in contrast to SM’s Bonus items which is the SM Supermarket brand for grocery shoppers on a budget. Puregold may not have its own brand similar to SM Bonus, but apart from lowered prices, it also offers promos and discounts on wholesale purchases and bundled items which has been its competitive advantage After analyzing the competitor, we proceed with selecting the pricing method. Puregold makes use of value pricing to win loyal customers by charging fairly low price for high quality offering. Lastly, final price is selected. Puregold considers the price’s impact to customers and it seemed to have been effective since it was able to attract, as mentioned, loyal customers. Target Market : Less Affluent 1) Setting the Price select objective - maximum market share - if market is price sensitive and low price stimulates growth; production and distribution costs fall with actual experience; low price discourages market competition determine demand – although puregold is comprised of commodities which maybe considered as necessities, the supermarket business generally have a lot of substitutes so a change in price is usually noticeable especially with its target market of less affluent masses. Price is a big part of total cost of operating its business in its lifetime so it is elastic. estimate costs – building rent (fixed costs), variable costs (employee salary) analyze competitors’ costs, prices & offers – competitors includes SM Supermarket, Shopwise, Robinsons Supermarket There’s no conclusive answer as to which supermarket offers lower prices. Some products in SM Hypermarket are either cheaper or more expensive than Puregold and vice versa. Interestingly, SM Markets don’t have uniform pricing across all stores. So don’t be surprised to find a certain toothpaste priced differently at two different supermarkets in SM. For grocery shoppers on a budget, SM Hypermarket offers affordable food and household products under its private label brand SM Bonus. Compared to products from popular brands, SM Bonus items— ranging from rice and cooking oil to ice cream and toilet paper—are a lot cheaper. Giving more options for stretching your budget are the Valuepacks that consist of different SM Bonus products and/or items from other brands bundled in one low-cost package. Puregold may not have its own brand similar to SM Bonus, but it does offer promos and discounts on wholesale purchases and bundled items. select pricing method - value pricing - They win loyal customers by charging a fairly low price for a high-quality offering. f) select final price – impact of price to customers – they were able to attract loyal customers because of their fairly low price in contrast to other supermarket players and groceries
- Now that the initial price has been set, this has been followed by various price adaptations such as quantity discounts as mentioned in the form of bundled items. Puregold also offers discounts for large volume purchase of small groceries and corporations. Promotional discounting is also being used for say their Holiday Bundles during Christmas Season. Functional Discounts are also offered within its trade channel members. It was able to establish the Aling Puring which converts sari-sari store partners into mini-marts. Price differential is also seen in its customer segment pricing for Senior Citizens. After Price Adaptations, Price change are observed because of Puregold’s drive to dominate the market trough lower costs. Again as mentioned they initiated price cuts in order to gain more market share. However, SM Supermarket in some of its “low-end” stores in order to match reduced prices of Puregold. That is why if you go at both stores nowadays, there is no conclusive evidence which offers cheaper prices. Nonetheless, Puregold differentiated the store via rebranding, changing the over-all appearance of the supermarket’s interior to be filled with brown boxes and relatively not that well-polished floors in order to retain appeal to the target market of less affluent. 2) Adapting the Price Price Discounts and Allowances - Quantity Discounts – discounts for large volume purchase of small groceries and corporations; They also offer discounts for excess inventory Promotional Pricing – Psychological Discounting – Holiday Bundle Functional Discounts - for trade-channel members if they will e.g. sell and store Price Differential – Customer Segment Pricing – Senior Discount 3) Initiating Price Change Drive to dominate the market through lower costs. The company initiated price cuts in the hope of gaining market share and lower costs. 4) Ways to respond to Competitors’ Price Change SM reduced some of its prices to match Puregold. They further differentiated the product or service via the over-all appearance of the supermarket, filled with brown boxes inside and relatively not that well-polished compared to supermarkets such as SM.
- Chapter Questions This presentation aims to answer: 1) Consumers means of processing and evaluating prices 2) Ways of setting initial prices for products and services 3) Ways to adapt prices to meet varying circumstances and opportunities 4) Initiating price change 5) Ways to respond to competitors' price change So basically that’s it. To recap, in this presentation we were able to discuss…