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Phillip. Kevin Lane. Kotler • Keller. Marketing Management • 14e. Chapter 14. Developing Pricing Strategies and Programs. Discussion Questions. How do consumers process and evaluate prices? How should a company set prices initially for products or services? - PowerPoint PPT Presentation
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Kotler • KellerPhillip Kevin Lane
Marketing Management • 14e
Developing Pricing Strategies and Programs
Chapter 14
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 3 of 33
Discussion Questions
1. How do consumers process and evaluate prices?
2. How should a company set prices initially for products or services?
3. How should a company adapt prices to meet varying circumstances and opportunities?
4. When should a company initiate a price change?
5. How should a company respond to a competitor’s price change?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 4 of 33
Marketing Mix
PromotionPlace
Revenue Producer
Cost
Cost
Cost
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Pricing
Bargaining
$31.50
$33.50
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Changing Price Environment
Instant Price Comparisons
I’ll pay $235.00
Name Your Own Price
Get Products Free
Buyers
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$29.99 $19.99 $24.99
Changing Price Environment
Sellers
Monitor Customers
Selective Pricing
Negotiate Prices
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How Companies Price
Pricing Department
Small Business Owner
Product-line Managers (w/guidance)
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Consumer Psychology and Pricing
Reference Prices
Price-Quality Inferences
Price Endings$1.99
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A Black T-Shirt
Armani - $275
Gap - $14.90
H&M - $7.90
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Select Final Price
Setting the Price
1
Price Method
Competitor Analysis
2
3
4
5
6
Estimate Costs
Determine Demand
Pricing Objective
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Selecting the Pricing Objective
SurvivalMaximum Current ProfitMaximum Market ShareMaximum Market SkimmingProduct-Quality LeadershipOther Objectives
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Determining Demand
Price sensitivityEstimating demand curvesPrice Elasticity of Demand
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Figu
re
14.1 Inelastic and Elastic Demand
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Estimating Costs
Demand Price Ceiling
Costs
Profit
Price
Price Floor
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Estimating Costs
Fixed Costs (overhead) Variable Costs Total Costs
Types of costs
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Figu
re
14.2 Costs at Varying Levels of Production
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Estimating Costs
Accumulated Production
Experience Curve(Learning Curve)
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Estimating Costs
Target Costing
Market research Design engineers
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Figu
re
14.3 The Experience Curve
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Analyzing Competitors’ Offers
“A”“B”
Worth to Customer
Costs Reaction
Price
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Selecting a Pricing Method
Pricing Methods• Markup • Target-return• Perceived-Value• Value• Going-rate• Auction-type
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Figu
re
14.4
Three Cs Model for
Price Setting
Ceiling price
Customers’ assessment of unique product
features
Orienting point
Competitors’ prices and prices of substitutes
Costs
Floor Price
High Price(No possible
demand at this price)
Low Price(No possible
profit at this price)
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Markup Pricing
Variable cost per toaster $10
Fixed costs $300,000
Expected unit sales 50,000
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Target-Return Pricing
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Figu
re
14.5 Target-Return Pricing
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Perceived-Value Pricing
Customer’s perceived-value
• Performance $$$• Warranty $• Customer support $• Reputation $$
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Value Pricing
P1 P2C1 C2
Level of Quality
THOUSANDS OF
LOW PRICES EVERY DAYthroughout the store
EDLP
High
LowPricing
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Going-Rate Pricing
Follow the Leader
Commodities
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Auction PricingEnglish auction
(ascending bids)
Dutch auction (descending bids)
Sealed-bid auction
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Selecting the Final Price
Brand Quality
Impact on others
Pricing Policies
Gain-and-risk-sharing
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Adapting the PriceGeographic Pricing
Price Discounts and Allowances
Promotional Pricing
Differentiated Pricing
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Dealing with Price Changes
Competitor Moves
Raising Prices
Cutting Prices
