Kotler mm13e media_14
- 1. 14 Developing Pricing Strategies and Programs Marketing Management, 13th ed
- 2. Chapter Questions • How do consumers process and evaluate prices? • How should a company set prices initially for products or services? • How should a company adapt prices to meet varying circumstances and opportunities? • When should a company initiate a price change? • How should a company respond to a competitor’s price challenge? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-2
- 3. Gillette Commands a Price Premium Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-3
- 4. Synonyms for Price • Rent • Special assessment • Tuition • Bribe • Fee • Dues • Fare • Salary • Rate • Commission • Toll • Wage • Premium • Tax • Honorarium Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-4
- 5. Common Pricing Mistakes • Determine costs and take traditional industry margins • Failure to revise price to capitalize on market changes • Setting price independently of the rest of the marketing mix • Failure to vary price by product item, market segment, distribution channels, and purchase occasion Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-5
- 6. Consumer Psychology and Pricing Reference Prices Price-quality inferences Price endings Price cues Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-6
- 7. Table 14.1 Possible Consumer Reference Prices • “Fair price” • Lower-bound price • Typical price • Competitor prices • Last price paid • Expected future • Upper-bound price price • Usual discounted price Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-7
- 8. Table 14.2 Consumer Perceptions vs. Reality for Cars Overvalued Brands Undervalued Brands • Land Rover • Mercury • Kia • Infiniti • Volkswagen • Buick • Volvo • Lincoln • Mercedes • Chrysler Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-8
- 9. Tiffany’s Price-Quality Relationship Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-9
- 10. Price Cues • “Left to right” pricing ($299 vs. $300) • Odd number discount perceptions • Even number value perceptions • Ending prices with 0 or 5 • “Sale” written next to price Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-10
- 11. When to Use Price Cues • Customers purchase item infrequently • Customers are new • Product designs vary over time • Prices vary seasonally • Quality or sizes vary across stores Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-11
- 12. Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-12
- 13. Step 1: Selecting the Pricing Objective • Survival • Maximum current profit • Maximum market share • Maximum market skimming • Product-quality leadership Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-13
- 14. Step 2: Determining Demand Price Sensitivity Estimating Demand Curves Price Elasticity of Demand Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-14
- 15. Figure 14.2 Inelastic and Elastic Demand Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-15
- 16. Table 14.3 Factors Leading to Less Price Sensitivity • The product is more distinctive • Buyers are less aware of substitutes • Buyers cannot easily compare the quality of substitutes • The expenditure is a smaller part of buyer’s total income • The expenditure is small compared to the total cost of the end product • Part of the cost is paid by another party • The product is used with previously purchased assets • The product is assumed to have high quality and prestige • Buyers cannot store the product Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-16
- 17. Step 3: Estimating Costs Types of Costs Accumulated Production Activity-Based Cost Accounting Target Costing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-17
- 18. Cost Terms and Production • Fixed costs • Variable costs • Total costs • Average cost • Cost at different levels of production Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-18
- 19. Figure 14.4 Cost per Unit as a Function of Accumulated Production Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-19
- 20. 9 Lives Uses Target Costing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-20
- 21. Step 5: Selecting a Pricing Method • Markup pricing • Target-return pricing • Perceived-value pricing • Value pricing • Going-rate pricing • Auction-type pricing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-21
- 22. Figure 14.6 Break-Even Chart Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-22
- 23. Auction-Type Pricing English auctions Dutch auctions Sealed-bid auctions Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-23
- 24. Step 6: Selecting the Final Price • Impact of other marketing activities • Company pricing policies • Gain-and-risk sharing pricing • Impact of price on other parties Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-24
- 25. Price-Adaptation Strategies Geographical Pricing Discounts/Allowances Promotional Pricing Differentiated Pricing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-25
- 26. Price-Adaptation Strategies Countertrade Discounts/ Allowances • Barter • Cash discount • Compensation deal • Quantity discount • Buyback • Functional discount arrangement • Seasonal discount • Offset • Allowance Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-26
- 27. Promotional Pricing Tactics • Loss-leader pricing • Special-event pricing • Cash rebates • Low-interest financing • Longer payment terms • Warranties and service contracts • Psychological discounting Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-27
- 28. Differentiated Pricing • Customer-segment pricing • Product-form pricing • Image pricing • Channel pricing • Location pricing • Time pricing • Yield pricing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-28
- 29. Table 14.6 Profits Before and After a Price Increase Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-29
- 30. Increasing Prices Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-30
- 31. Brand Leader Responses to Competitive Price Cuts • Maintain price • Maintain price and add value • Reduce price • Increase price and improve quality • Launch a low-price fighter line Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-31
- 32. Marketing Debate Is the right price a fair price? Take a position: 1. Prices should reflect the value that consumers are willing to pay. or 2. Prices should primarily just reflect the cost involved in making a product. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-32
- 33. Marketing Discussion Think of all the pricing methods described in the chapter. As a consumer, which pricing method do you personally prefer to deal with? Why? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-33