WEEK 7- Pricing.ppt

8/16/2019 WEEK 7- Pricing.ppt

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DevelopingPricing Strategies

and Programs

1


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Copyright © 2012 Pearson Education 14-2

Chapter Questions

How do consumers process and evaluateprices?

How should a company set prices initially or

products or services? How should a company adapt prices to meet

varying circumstances and opportunities?

!hen should a company initiate a price

change?

How should a company respond to a

competitor"s price challenge?


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Copyright © 2012 Pearson Education 14-#

Common Pricing Mistakes

$etermine costs and ta%e traditional industry

margins

&ailure to revise price to capitali'e on mar%et

changes (etting price independently o the rest o the

mar%eting mi)

&ailure to vary price *y product item+ mar%etsegment+ distri*ution channels+ and purchase

occasion


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Table 14.1 Possible Consumer

Reference Prices

,&air price

.ypical price

/ast price paid

pper-*ound price

/ower-*ound price

Competitor prices

E)pected uture price

sual discounted

price



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Tiers in Pricing

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Copyright © 2012 Pearson Education 14-

Steps in Setting Price

(elect the price o*3ective

$etermine demand

Estimate costs

naly'e competitor price mi)

(elect pricing method

(elect inal price


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Step 1: Selecting the Pricing Obecti!e

(urvival 6a)imum current proit 6a)imum mar%et share 6a)imum mar%et s%imming Product-7uality leadership


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Step ": #etermining #eman$

Price sensitivity

Estimate demand curves

Price elasticity o demand


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%igure 14.1 &nelastic an$

'lastic #eman$



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Table 14.( %actors )ea$ing to

)ess Price Sensiti!it*

.he product is more distinctive

:uyers are less aware o su*stitutes

:uyers cannot easily compare the 7uality o su*stitutes

E)penditure is a smaller part o *uyer"s total income E)penditure is small compared to the total cost

Part o the cost is paid *y another party

Product is used with previously purchased assets

Product is assumed to have high 7uality and prestige

:uyers cannot store the product



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Step (: 'stimating Costs

.ypes o costs

ccumulated production

ctivity-*ased cost accounting

.arget costing


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%igure 14." Cost Per +nit at

#ifferent )e!els of Pro$uction



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Target Costing

Copyright © 2012 Pearson Education 14-1#


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,nal*-ing Competitors Costs



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%igure 14.4 The Three Cs Mo$el

for Price/Setting



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Step 0: Selecting a Pricing Metho$

6ar%up pricing

.arget-return pricing

Perceived-value pricing

;alue pricing


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Step : Selecting the %inal Price

=mpact o other mar%eting activities

Company pricing policies


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Price #iscounts an$ ,llo2ances

$iscount >uantity discount

&unctional discount

(easonal discount llowance



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#ifferentiate$ Pricing

Customer-segment pricing

Product-orm pricing

=mage pricing

Channel pricing

/ocation pricing

.ime pricing

ield pricing


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Traps in Price Cutting Strategies

/ow-7uality trap

&ragile-mar%et-share trap

(hallow-poc%ets trap

Price-war trap



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Copyright © 2012 Pearson Education 14-2#

3ran$ )ea$er Responses to

Competiti!e Price Cuts

6aintain price

6aintain price and add value

@educe price =ncrease price and improve 7uality

/aunch a low-price ighter line


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%or Re!ie2

How do consumers process and evaluateprices?

How should a company set prices initially or

products or services?

How should a company adapt prices to meet

varying circumstances and opportunities?

!hen should a company initiate a price change?

How should a company respond to acompetitor"s price challenge?


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WEEK 7- Pricing.ppt