Chapter 14 - Developing pricing strategies and programs. In this chapter, we will address the following 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 competitor’s price change?
Phillip Kevin Lane Kotler • Keller Marketing Management • 14e Ch r e t p a Developing Pricing Strategies and Discussion Questions How 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 competitor’s price change? Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide of 33 Marketing Mix Revenue Producer Cos t Cos t Place Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Promotio n Cos t Slide of 33 Pricing $31.50 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Bargaini ng $33.50 Slide of 33 Changing Price Environment Buyer s I’ll pay $235.00 Instant Price Comparisons Get Products Free Name Your Own Price Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide of 33 Changing Price Environment Seller s $29.99 $19.99 $24.99 Selective Pricing Negotiate Prices Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Monitor Customers Slide of 33 How Companies Price Product-line Managers (w/guidance) Small Business Owner Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Pricing Department Slide of 33 Consumer Psychology and Pricing Price-Quality Inferences Reference Prices $1 99 Price Endings Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide of 33 A Black T-Shirt Armani - $275 Gap - $14.90 H&M - $7.90 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 10 of 33 Estimating Costs Target Costing Market research Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Design engineers Slide 19 of 33 e r u g Fi 4.3 The Experience Curve Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 20 of 33 Analyzing Competitors’ Offers Price Costs Reactio n “A” “B” Worth to Customer Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 21 of 33 Selecting a Pricing Method Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Pricing Methods • Markup • Target-return • PerceivedValue • Value • Going-rate • Auction-type Slide 22 of 33 e r u g Fi 4.4 High Price (No possible demand at this price) Ceiling price Three Cs Model for Price Setting Customers’ assessment of unique product features Orienting point Competitors’ prices and prices of substitutes Costs Floor Price Low Price (No possible profit at this price) Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 23 of 33 Markup Pricing Variable cost per toaster $10 Fixed costs $300,000 Expected unit sales 50,000 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 24 of 33 Target-Return Pricing Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 25 of 33 e r u g Fi 4.5 Target-Return Pricing Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 26 of 33 Perceived-Value Pricing Customer’s perceivedvalue • • • • Performance $$$ Warranty $ Customer support $ Reputation $$ Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 27 of 33 Value Pricing EDLP THOUSANDS OF LOW PRICES EVERY DAY Level of Quality throughout the store P C1 P C2 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall High Pricin Low g Slide 28 of 33 Going-Rate Pricing Commodities Follow the Leader Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 29 of 33 Auction Pricing English auction (ascending bids) Dutch auction (descending bids) Sealed-bid auction Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 30 of 33 Selecting the Final Price Impact on others Brand Qualit y Pricing Policies Gain-and-riskCopyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 31 of 33 Adapting the Price Geographic Pricing Price Discounts and Allowances Differentiated Pricing Promotional Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 32 of 33 Dealing with Price Changes Raising Prices Cutting Prices Competitor Moves Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 33 of 33 ... 2012 Pearson Education, Inc Publishing as Prentice Hall Slide of 33 A Black T-Shirt Armani - $275 Gap - $14. 90 H&M - $7.90 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide... Education, Inc Publishing as Prentice Hall Pricing Methods • Markup • Target-return • PerceivedValue • Value • Going-rate • Auction-type Slide 22 of 33 e r u g Fi 4.4 High Price (No possible demand at... Sealed-bid auction Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall Slide 30 of 33 Selecting the Final Price Impact on others Brand Qualit y Pricing Policies Gain-and-riskCopyright