marketing princiles unit 8 price and value

Unit Price and Value CuuDuongThanCong.com https://fb.com/tailieudientucntt R d Map: Road M Previewing P i i the th Concepts C t  Identify Id tif and d explain l i the th external t l and d internal i t l factors f t affecting ff ti a firm's pricing decisions  Contrast the three general approaches to setting prices  Describe the major strategies for pricing imitative and new products  Explain how companies find a set of prices that maximizes the profits from the total product mix  Discuss how companies adjust their prices to take into account diff different t ttypes off customers t and d situations it ti  Discuss the key issues related to initiating and responding to price changes CuuDuongThanCong.com https://fb.com/tailieudientucntt We will begin learning about pricing i i strategy t t by b discussing di i beer! b ! QuickTime™ and a QuickTime TIFF (Uncompressed) decompressor are needed to see this picture QuickTime™ and a QuickTime TIFF (Uncompressed) decompressor are needed to see this picture CuuDuongThanCong.com https://fb.com/tailieudientucntt Factors Affecting Price Decisions CuuDuongThanCong.com https://fb.com/tailieudientucntt Internal Factors Affecting Pricing Decisions: Marketing Objectives Survival Low Prices Hoping to Increase Demand Current Profit Maximization Marketing g Choose the Price that Produces the Maximum Current Profit,, Etc Objectives Market Share Leadership Low as Possible Prices to Become the Market Share Leader Leader Product Quality Leadership High Prices to Cover Higher Performance Quality and R&D CuuDuongThanCong.com https://fb.com/tailieudientucntt Four Seasons Hotel Four Seasons uses the product quality leadership strategy strategy It starts with very high quality service, then charges a price to match http://www.fourseasons com CuuDuongThanCong.com https://fb.com/tailieudientucntt Internal Factors Affecting Pricing Decisions: D i i Marketing M k ti Mix Mi Strategy St t Product Design Nonprice Positions Price Distribution P Promotion ti CuuDuongThanCong.com https://fb.com/tailieudientucntt Types of Cost Factors that Affect Pricing Decisions Fixed Costs (Overhead) Costs that don’t vary with sales or production levels Executive Salaries, Rent Variable Costs Costs that vary di tl with directly ith the th level of production Raw materials Total Costs Sum of the Fixed and Variable Costs for Any Given Level of Production CuuDuongThanCong.com https://fb.com/tailieudientucntt External Factors Affecting Pricing Decisions Market and Demand Competitors’ Costs, Prices and Offers Prices, Other External Factors Economic Conditions Reseller Reactions Government Actions S i l Concerns Social C CuuDuongThanCong.com https://fb.com/tailieudientucntt Market and Demand Factors Affecting Pricing Decisions Pricing in Different Types of Markets Pure Competition Many Buyers and Sellers Who Have Little Eff t on th Effect the P Price i Monopolistic C Competition titi Pure Monopoly Single Seller Oligopolistic Competition Few Sellers Who Are Many Buyers and Sellers Sensitive to Each Other’s Who Trade Over a Pricing/ Marketing Range of Prices Strategies CuuDuongThanCong.com https://fb.com/tailieudientucntt 10 New-Product Pricing Strategies Use Under These Conditions:  Market Must be Highly Price-Sensitive i S i i so a Low Price Produces More Market Growth P d ti /Di t ib ti  Production/Distribution Costs Must Fall as Sales Volume Increases  Must Out M t Keep K O t Competition C titi & Maintain Its Low Price Position or Benefits May Only be Temporary Temporary Market Penetration  Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply  Attract a Large Number of Buyers and Win a Larger Market Share  I.e Dell 19 CuuDuongThanCong.com https://fb.com/tailieudientucntt Which pricing strategy – (Market Skimming or Market Penetration) does each of the following companies/products use?  McDonald McDonald’s s,  Sony (television and other home electronics),  Bic Corporation (pens, lighters, shavers, and related products), d t ) and d  IBM (personal computers)  Salt 20 CuuDuongThanCong.com https://fb.com/tailieudientucntt Product Mix-Pricing g Strategies: g Product Line Pricing Involves setting price steps between various products in a product line based on: Cost differences d ff b between products, Customer evaluations of different features, and Competitors’ prices 21 CuuDuongThanCong.com https://fb.com/tailieudientucntt Product Mix Mix-Pricing Pricing Strategies Optional-Product Pricing g optional p or accessory products sold with the main product i e camera bag i.e bag Captive-Product Pricing products that must be used with the main product i.e film 22 CuuDuongThanCong.com https://fb.com/tailieudientucntt Adjusting Basic Price to Reward d Customers for f Certain Responses Cash Discount Quantity Discount Functional Discount Seasonal Discount Trade in Allowance Trade-in Promotional Alowance 23 CuuDuongThanCong.com https://fb.com/tailieudientucntt Segmented d Pricing Selling Products at two or more prices even through g there is no difference in cost Customer Customer Segment Product - Form Location Pricing Time Pricing 24 CuuDuongThanCong.com https://fb.com/tailieudientucntt How much does a bottle of perfume cost? QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this picture QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this picture 25 CuuDuongThanCong.com https://fb.com/tailieudientucntt Psychological Pricing  Considers the psychology of prices and not simply the economics  Customers use price less when they can judge quality of a product  Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a product 26 CuuDuongThanCong.com https://fb.com/tailieudientucntt Promotional Pricing Loss Leaders Temporarily Pricing Products Below List Price Through: S Special-Event i lE Pricing Pi i Cash Rebates Low-Interest Financing Longer L Warranties W i Free Maintenance Discounts CuuDuongThanCong.com https://fb.com/tailieudientucntt 27 Other Price Adjustment Strategies Geographical g p Pricing g International Pricing •Pricing products for customers located in different parts of the countryy or world • i.e FOB-Origin, UniformDelivered, Zone, BasingPoint, & Freight-Absorption • Adjusting prices for customers in different counties • Price Depends on Costs Costs, Consumers, Economic Conditions, Competitive Situations, & Other Factors 28 CuuDuongThanCong.com https://fb.com/tailieudientucntt Initiating g Price Changes g Why? Wh ? Why? Excess Capacity Cost Inflation Falling Market Share Overdemand: Company Can’t Supply l Allll Customers’’ Needs Dominate Market Through Lower Costs 29 CuuDuongThanCong.com https://fb.com/tailieudientucntt Reactions to Price Changes Price Cuts Are Seen by Buyers As: Competitors Mostly React When: Being Replaced by Newer Models Number of Firms is Small Current Models Are Not Selling Well Product is Uniform Company is in Financial Trouble Buyers are Well Informed Quality Has Been Reduced d d Price May Come Down Further 30 CuuDuongThanCong.com https://fb.com/tailieudientucntt Assessing/Responding g p g to Competitor’s p Price Changes 31 CuuDuongThanCong.com https://fb.com/tailieudientucntt Public Policy Issues in Pricing 32 CuuDuongThanCong.com https://fb.com/tailieudientucntt Rest Stop: p Reviewing g the Concepts p  Identify and explain the external and internal factors affecting a firm's pricing decisions  Contrast the three general approaches to setting prices  Describe D ib the th major j strategies t t i for f pricing i i imitative i it ti and d new products  Explain how companies find a set of prices that maximizes the profits from the total product mix  Discuss how companies adjust their prices to take into account different types of customers and situations  Discuss the key issues related to initiating and responding to price changes changes 33 CuuDuongThanCong.com https://fb.com/tailieudientucntt ... Inelastic Demand Demand Hardly Changes With g in Price a Small Change P2 P1 Price Q2 Q1 Quantity Demanded per Period B Elastic Demand Demand Changes Greatly With a Small Change in Price P’ P’1... Buyers and Sellers Sensitive to Each Other’s Who Trade Over a Pricing/ Marketing Range of Prices Strategies CuuDuongThanCong.com https://fb.com/tailieudientucntt 10 Pricce Price Elasticity of Demand... Cost Fixed Cost 200 400 600 80 0 1,000 Sales Volume in Units (thousands) 14 CuuDuongThanCong.com https://fb.com/tailieudientucntt Cost-Based Cost Based Versus ValueValue Based Pricing 15 CuuDuongThanCong.com