Title: MARKETING MANAGEMENT 12th edition
1MARKETING MANAGEMENT12th edition
- 14
- Developing Pricing Strategies and Programs
Kotler Keller
2Chapter 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 competitors
price challenge?
3Whirlpools Duet combo is nearly four times the
price of comparable models
4Synonyms for Price
- Special assessment
- Bribe
- Dues
- Salary
- Commission
- Wage
- Tax
- Rent
- Tuition
- Fee
- Fare
- Rate
- Toll
- Premium
- Honorarium
5Common 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
6Consumer Psychology and Pricing
Reference Prices
Price-quality inferences
Price endings
Price cues
7Table 14.1 Possible Consumer Reference Prices
- Fair price
- Typical price
- Last price paid
- Upper-bound price
- Lower-bound price
- Competitor prices
- Expected future price
- Usual discounted price
8Table 14.2 Consumer Perceptions vs. Reality for
Cars
- Overvalued Brands
- Land Rover
- Kia
- Volkswagen
- Volvo
- Mercedes
- Undervalued Brands
- Mercury
- Infiniti
- Buick
- Lincoln
- Chrysler
9Price Cues
- Left to right pricing (299 versus 300)
- Odd number discount perceptions
- Even number value perceptions
- Ending prices with 0 or 5
- Sale written next to price
10When 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
11Steps in Setting Price
Select the price objective
Determine demand
Estimate costs
Analyze competitor price mix
Select pricing method
Select final price
12Step 1 Selecting the Pricing Objective
- Survival
- Maximum current profit
- Maximum market share
- Maximum market skimming
- Product-quality leadership
13Figure 14.1 Price Tiers in the Ice Cream Market
14Step 2 Determining Demand
Price Sensitivity
Estimating Demand Curves
Price Elasticity of Demand
15Figure 14.2 Inelastic and Elastic Demand
16Step 3 Estimating Costs
Types of Costs
Accumulated Production
Activity-Based Cost Accounting
Target Costing
17Cost Terms and Production
- Fixed costs
- Variable costs
- Total costs
- Average cost
- Cost at different levels of production
18Figure 14.4 Cost per Unit as a Function of
Accumulated Production
199 Lives Uses Target Costing
20Step 5 Selecting a Pricing Method
- Markup pricing
- Target-return pricing
- Perceived-value pricing
- Value pricing
- Going-rate pricing
- Auction-type pricing
21Figure 14.6 Break-Even Chart
22Auction-Type Pricing
English auctions
Dutch auctions
Sealed-bid auctions
23Step 6 Selecting the Final Price
- Impact of other marketing activities
- Company pricing policies
- Gain-and-risk sharing pricing
- Impact of price on other parties
24Price-Adaptation Strategies
Geographical Pricing
Discounts/Allowances
Promotional Pricing
Differentiated Pricing
25Price-Adaptation Strategies
- Countertrade
- Barter
- Compensation deal
- Buyback arrangement
- Offset
- Discounts/ Allowances
- Cash discount
- Quantity discount
- Functional discount
- Seasonal discount
- Allowance
26Promotional Pricing Tactics
- Loss-leader pricing
- Special-event pricing
- Cash rebates
- Low-interest financing
- Longer payment terms
- Warranties and service contracts
- Psychological discounting
27Differentiated Pricing and Price Discrimination
- Customer-segment pricing
- Product-form pricing
- Image pricing
- Channel pricing
- Location pricing
- Time pricing
- Yield pricing
28Table 14.5 Profits Before and After a Price
Increase
29Increasing Prices
Delayed quotation pricing
Escalator clauses
Unbundling
Reduction of discounts
30Figure 14.7 Price-Reaction Program for Meeting
Competitors Price Cut
31Brand 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
32Marketing Debate
- Is the right price a fair price?
- Take a position
- Prices should reflect the value that
- consumers are willing to pay.
- 2. Prices should primarily just reflect the cost
- involved in making a product.
33Marketing Discussion
- As a consumer, which pricing
- method do you personally
- prefer to deal with? Why?