Kotler14 Media

8/8/2019 Kotler14 Media

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MARKETING MANAGEMENT12th edition

14

Developing Pricing

Strategies andPrograms

Kotler


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14-2

ChapterQuestions

How do consumersprocessand evaluateprices?

Howshould a companysetpricesinitially forproductsorservices?

Howshould a companyadaptpricesto meetvarying circumstancesand opportunities?

Whenshould a companyinitiateapricechange?

Howshould a companyrespond toa

competitorsprice challenge?


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14-3

Whirlpools Duetcomboisnearlyfourtimesthepriceofcomparable

models


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14-4

Synonyms forPrice

Rent

Tuition

Fee

Fare

Rate

Toll

Premium

Honorarium

Specialassessment

Bribe

Dues

Salary

Commission

Wage

Tax


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14-5

Common Pricing Mistakes

Determine costsand taketraditionalindustry margins

Failuretorevisepriceto capitalizeon

market changes

Settingpriceindependentlyoftherestofthe marketing mix

Failuretovaryprice byproductitem,marketsegment, distribution channels, andpurchaseoccasion


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14-6

ConsumerPsychologyand Pricing

Reference Prices

Price-qualityinferences

Priceendings

Price cues


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14-7

Table14.1 PossibleConsumerReference Prices

Fairprice

Typicalprice

Lastpricepaid Upper-bound price

Lower-bound price

Competitorprices

Expected futureprice Usual discounted

price


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Table14.2ConsumerPerceptionsvs. Reality forCars

Overvalued Brands

Land Rover

Kia

Volkswagen

Volvo

Mercedes

Undervalued Brands

Mercury

Infiniti

Buick

Lincoln

Chrysler


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PriceCues

Lefttorightpricing ($299versus $300)

Odd numberdiscountperceptions

Evennumbervalueperceptions

Endingpriceswith0or5

Salewrittennexttoprice


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WhentoUse PriceCues

Customerspurchaseitem infrequently

Customersarenew

Product designsvaryovertime

Pricesvaryseasonally

Qualityorsizesvaryacrossstores


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14-11

StepsinSetting Price

Selectthepriceobjective

Determine demand

Estimate costs

Analyze competitorprice mix

Selectpricing method

Select finalprice


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14-12

Step1:Selectingthe PricingObjective

Survival

Maximum currentprofit

Maximum marketshare

Maximum market

skimming Product-qualityleadership


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14-13

Figure14.1 Price Tiersinthe IceCream Market


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14-14

Step2: Determining Demand

PriceSensitivity

Estimating

Demand Curves

Price Elasticity

of Demand


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14-15

Figure14.2 Inelastic and Elastic Demand


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14-16

Step3: EstimatingCosts

TypesofCosts

TargetCosting

AccumulatedProduction

Activity-Based

Cost Accounting


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14-17

Cost Termsand Production

Fixed costs

Variable costs

Total costs

Average cost

Costat differentlevelsofproduction


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Figure14.4CostperUnitasaFunctionofAccumulated Production


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14-19

9LivesUses TargetCosting


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Step5:SelectingaPricing Method

Markuppricing

Target-returnpricing

Perceived-value

pricing

Valuepricing

Going-ratepricing

Auction-typepricing


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Figure14.6Break-EvenChart


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Auction-Type Pricing

Englishauctions

Dutchauctions

Sealed-bid auctions


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Step6:SelectingtheFinal Price

Impactofothermarketingactivities

Companypricing

policies

Gain-and-risksharingpricing

Impactofpriceonotherparties


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14-24

Price-AdaptationStrategies

Geographical Pricing

Discounts/Allowances

Differentiated Pricing

Promotional Pricing


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14-25

Price-AdaptationStrategies

Countertrade

Barter

Compensation deal

Buybackarrangement

Offset

Discounts/ Allowances

Cash discount

Quantity discount

Functional discount

Seasonal discount

Allowance


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14-26

Promotional Pricing Tactics

Loss-leaderpricing

Special-eventpricing

Cashrebates

Low-interest financing Longerpaymentterms

Warrantiesandservice contracts

Psychologicaldiscounting


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Differentiated PricingandPrice Discrimination

Customer-segmentpricing

Product-form pricing

Imagepricing Channelpricing

Locationpricing

Timepricing

Yield pricing


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Table14.5 ProfitsBeforeandAftera Price Increase


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14-29

Increasing Prices

Delayed quotationpricing

Escalatorclauses

Unbundling

Reductionof discounts


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Figure14.7 Price-Reaction Program forMeetingCompetitors PriceCut


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Brand LeaderResponsestoCompetitive PriceCuts

Maintainprice

Maintainpriceand add value

Reduceprice Increasepriceand improvequality

Launchalow-price fighterline


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14-32

Marketing Debate

Istherightpricea fairprice?

Takeaposition:1. Pricesshould reflectthevaluethatconsumersarewillingtopay.

2. Pricesshould primarily justreflectthe costinvolved in makingaproduct.


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Marketing Discussion

Asa consumer, whichpricingmethod doyou personallypreferto dealwith?Why?

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