MKT31 - CHAP10

  1. –is the amount of money charged for a product or service.
  2. –is the sum of all the values that consumers exchange for the benefits of having or using the product or service.
  3. –charging different prices depending on individual customers and situations.
    Dynamic Pricing
  4. Pricing Best Practices
    • Develop a unique pricing mentality.
    • Consistently deliver more value.
    • Price strategically, not opportunistically.
    • Know your competition.
    • Make pricing a process.
  5. Pricing Decision Factors
    * Internal Factors:
    • Marketing objectives
    • Marketing mix
    • Costs
    • Organization style
    • Target market
    • Positioning objectives
  6. Pricing Decision Factors
    * External Factors:
    • Nature of the market
    • Demand
    • Competitor
    • Economic state
    • Reseller needs
    • Government actions
    • Social concerns
  7. –Many buyers and sellers where each has little effect on the going market price
    Pure Competition
  8. –Many buyers and sellers who trade over a range of prices.
    Monopolistic Competition
  9. –Few sellers and sensitive to each other’s pricing/marketing strategies.
    Oligopolistic Competition
  10. –Market consists of a single seller.
    Pure Monopoly
  11. –The relationship between price
    changes and the number of units sold.
  12. –A way of measuring how sensitive the market is to price changes.
  13. – minimal change in demand as price increases.
  14. – significant drop in demand as price increases.
  15. General Pricing Approaches
    • Cost-based approach
    • Value-based approach
    • Competition-based approach
  16. –Cost-plus pricing (cost of product + markup).
    –Break-even analysis
    Cost-based Approach
  17. –Consumer perceptions of value.
    Value-based Approach
  18. –What competitors are charging.
    Competition-based Approach
  19. Pricing New Products
    • Skimming Pricing
    • Penetration Pricing
  20. –High price to reap maximum profit from early adopter segments.
    –Can encourage competition.
    –Products must be unique and hard to copy.
    Skimming Pricing
  21. –Low price to gain maximum market share.
    –May discourage competition.
    –Used when the product is easily copied.
    Penetration Pricing
  22. Product Mix Pricing Strategies
    • Product Line
    • Optional-product
    • Product Bundle Pricing
    • Captive-product
    • By-product Pricing
  23. –Involves setting price steps between various products in a product line.
    Product Line
  24. –Pricing optional or accessory products sold with the main product (e.g., ice maker with the refrigerator).
  25. –Combining several products and offering the bundle at a reduced price (e.g., computer with software and Internet access).
    Product Bundle Pricing
  26. –Pricing products that must be used with the main product (e.g., replacement cartridges for Gillette razors).
  27. –Setting a price for by-products in order to make the main product’s price more competitive (e.g., sawdust and buttermilk).
    By-product Pricing
  28. Price-Adjustment Strategies
    • Discount and allowance pricing
    • Segmented pricing
    • Psychological pricing
    • Promotional pricing
    • Geographical pricing
    • International pricing
  29. – a straight reduction based on cash, quantity, function, season.
  30. Kinds of Discounts
    • Cash (save 2 pesos)
    • Quantity (plus 20ml free)
    • Function (with fabcon)
    • Season (discount based on season)
  31. – promotional money paid by manufacturer to retailer.
  32. - Selling a product or service at two or more
    prices, where the difference in prices is not based on differences in costs.
    Segmented Pricing
  33. Segmented Pricing
    • Customer-segment
    • Product-form
    • Location pricing
    • Time pricing
  34. •Consumers usually perceive higher-priced products as having higher quality.
    •Consumers use price less when they can judge quality of a product.
    Psychological Pricing
  35. Promotional Pricing Approaches:
    • Special event pricing
    • Low-interest financing
    • Longer warranties
    • Free maintenance
    • Discounts
    • Cash rebates
  36. Price based on the following:
    –Zone pricing
    –Freight-absorption pricing
    Geographical Pricing
  37. Pricedepends on many factors, including:
    –Economic conditions
    –Competitive situations
    –Laws and regulations
    International Pricing
  38. Initiating Price Changes
    • Price Cuts
    • Price Increases
  39. –Excess capacity.
    –Falling market share.
    –Dominate market through lower costs.
    Price Cuts
  40. –Cost inflation.
    –Cannot supply all customers’ needs.
    Price Increases
  41. Responding to Competitor Price Changes
    * When a competitor lowers prices:
    • Reduce price to match the competitors’ price.
    • Maintain price but increase the perceived value of the offer.
    • Improve quality and raise price.
    • Hold price and introduce a new brand at a higher price.
    • Hold price and introduce a new brand at a lower price (fighting brand).
Card Set
MKT31 - CHAP10