Pricing

Marketing Mix
Product Price
Promotion Place
Revenue
Producer
Cost
Cost
Cost
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 3 of 33
Changing Price Environment
Instant Price Comparisons
Ill pay $235.00
Name Your Own Price
Get Products Free
Buyers
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 4 of 33
$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
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 7 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 8 of 33
Tiffanys
Price-Quality Relationship
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 9 of 33
Select Final Price
Setting the Price
1
Price Method
Competitor Analysis
2
3
4
5
6
Estimate Costs
Determine Demand
Pricing Objective
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 10 of 33
Selecting the Pricing Objective
Survival
Maximum Current Profit
Maximum Market Share
Maximum Market Skimming
Product-Quality Leadership
Other Objectives
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 11 of 33
Determining Demand
Price sensitivity
Estimating demand curves
Price Elasticity of Demand
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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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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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The Experience Curve
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Analyzing Competitors Offers
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
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 21 of 33
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)
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 22 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 23 of 33
Target-Return Pricing
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Target-Return Pricing
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Perceived-Value Pricing
Customers perceived-value

Performance $$$
Warranty $
Customer support $
Reputation $$
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 26 of 33
Value Pricing
P1 P2 C1 C2
Level of
Quality
THOUSANDS OF
LOW
PRICES
EVERY DAY
throughout the store
EDLP
High
Low
Pricing
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 27 of 33
Going-Rate Pricing
Follow the Leader
Commodities
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Auction Pricing
English auction
(ascending bids)
Dutch auction
(descending bids)
Sealed-bid auction
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 29 of 33
Selecting the Final Price
Brand
Quality
Impact on others
Pricing Policies
Gain-and-risk-sharing
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 30 of 33
Adapting the Price
Geographic Pricing
Price Discounts
and Allowances
Promotional Pricing
Differentiated Pricing
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 31 of 33
Dealing with Price Changes
Competitor Moves
Raising Prices
Cutting Prices