Session 23 MG 220 Marketing Management MBA 10

1. MG 220 Marketing Management
MBA 10
Fall 2010
Muhammad Talha Salam, Asst. Professor
talha.salam@nu.edu.pk
Access it online: www.slideshare.net/talhasalam
Part 5:
Shaping the Marketing Offerings
> Covering previously left content
> Understanding Pricing
> Quiz 6: Chap 9, 13/ed. Or Chap 11, 12/ed.
Class Presentation | Session 23 | 1 Nov 2010

2. Access it online: www.slideshare.net/talhasalam
Understanding Pricing
Price is the only revenue-producing “P”. Rest all are costs
Historically:
• Price was always set with negotiations.
• Only in 19th century, one-price concept was introduced which we all use today
(mostly)
How Companies Price
• Large Companies: Pricing is handled by Product Manager, Line Managers,
Marketing team etc.
• Small Companies: Top Management decides
• Even in Large companies, price is based on some important objectives
MG 220 Marketing Management 2

3. Access it online: www.slideshare.net/talhasalam
Understanding Pricing
Setting Pricing Strategy & Objectives requires understanding of
Consumer Psychology
Consumer Psychology & Pricing
• Economists consider consumers to be ‘price-takers’
• IMP: Consumers have their own perceptions and purchasing decisions
are based on their perception of a product’s stated and its stated price
• Three important topics to be considered:
– Reference Prices
– Price-Quality Inferences
– Price Endings (or Cues)
MG 220 Marketing Management 3

4. Access it online: www.slideshare.net/talhasalam
Understanding Pricing
Consumer Psychology & Pricing
• Reference Prices
– Consumer’s own knowledge of prices
– Generally a range and not exact number
– Consumers compare observed prices with both internal and external reference prices
– When these references are evoked:
Unpleasant surprises (if ref. price is lower than observed) can impact more than pleasant
surprises (if ref. price is higher than observed)
• Price-Quality Inferences
– Many consumers use price as an indicator of Quality
– Example of Perfume: It may cost 20 Rs but selling it even for 40 will give signal of being a
low quality product!
– Price acts a signal of quality particularly when there is no other indicator or information
about quality is available.
• Price Cues
– Many sellers believe price should end in an odd number
– Also using 299 instead of 300 gives a different cue
– Using “Sale” can also give a perception about price
– But it should be used very carefully
MG 220 Marketing Management 4

5. MG 220 Marketing Management
MBA 10
Fall 2010
Muhammad Talha Salam, Asst. Professor
talha.salam@nu.edu.pk
Access it online: www.slideshare.net/talhasalam
Part 5:
Shaping the Marketing Offerings
> Setting the Price
> Adapting the Price
> Initiating and Responding to Price Changes
Class Presentation | Session 24 | 4 Nov 2010