Kotler14_media.ppt 2291KB Aug 31 2008 09:59:00 PM

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MARKETING MANAGEMENT

12th_edition

14

Developing Pricing

Strategies and

Programs

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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

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Whirlpool’s Duet

combo is nearly

four times the

price of

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Synonyms for Price

• Rent • Tuition • Fee • Fare • Rate • Toll • Premium • Honorarium

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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,

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Consumer Psychology and Pricing

Reference Prices

Price-quality inferences

Price endings

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Table 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

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Table 14.2 Consumer

Perceptions vs. Reality for Cars

Overvalued Brands

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Price Cues

• “Left to right” pricing ($299 versus $300)

• Odd number discount perceptions

• Even number value perceptions

• Ending prices with 0 or 5

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When to Use Price Cues

• Customers purchase item infrequently

• Customers are new • Product designs vary

over time

• Prices vary seasonally • Quality or sizes vary

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Steps in Setting Price

Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

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Step 1: Selecting the Pricing

Objective

• Survival

• Maximum current profit

• Maximum market share

• Maximum market skimming

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[image:13.720.116.656.50.485.2]

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Step 2: Determining Demand

Price Sensitivity

Estimating

Demand Curves

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[image:15.720.376.676.157.448.2]

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Step 3: Estimating Costs

Types of Costs

Target Costing

Accumulated

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Cost Terms and Production

• Fixed costs • Variable costs • Total costs

• Average cost

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[image:18.720.27.702.84.452.2]

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Step 5: Selecting a

Pricing Method

• Markup pricing

• Target-return pricing • Perceived-value

pricing

• Value pricing

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[image:21.720.33.683.124.447.2]

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Auction-Type Pricing

English auctions

Dutch auctions

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Step 6: Selecting the Final Price

• Impact of other

marketing activities • Company pricing

policies

• Gain-and-risk sharing pricing

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Price-Adaptation Strategies

Geographical Pricing

Discounts/Allowances

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Price-Adaptation Strategies

Countertrade

• Barter

• Compensation deal • Buyback

arrangement • Offset

Discounts/ Allowances

• Cash discount

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Promotional Pricing Tactics

• Loss-leader pricing • Special-event pricing • Cash rebates

• Low-interest financing • Longer payment terms • Warranties and

service contracts • Psychological

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Differentiated Pricing and

Price Discrimination

• Customer-segment pricing

• Product-form pricing • Image pricing

• Channel pricing • Location pricing • Time pricing

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[image:28.720.35.695.119.327.2]

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Increasing Prices

Delayed quotation pricing

Escalator clauses

Unbundling

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[image:30.720.52.678.59.509.2]

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Brand Leader Responses to

Competitive Price Cuts

• Maintain price

• Maintain price and add value

• Reduce price

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Marketing Debate

 _{Is the right price a fair price?}

Take a position:

1. Prices should reflect the value that consumers are willing to pay.

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Marketing Discussion



As a consumer, which pricing