C

r
e
t
p
a
h 14

Developing
Pricing
Strategies

Marketing Mix
Revenu
e
Produce
r

Cos
t

Cos
t

Place

Promotio
n

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Cos
t

Slide 2 of 33

Pricing

$31.50

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Bargain
ing

$33.50

Slide 3 of 33

Changing Price Environment

Buye
rs
Ill pay
$235.00
Instant Price
Comparisons
Get Products
Free
Name Your Own
Price
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 4 of 33

How Companies Price

Product-line
Managers
(w/guidance)

Small Business
Owner

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Pricing
Department

Slide 5 of 33

Consumer Psychology and

Pricing
Price-Quality
Inferences

Reference
Prices

$1.
9

Price Endings

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 6 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 7 of 33

Setting the Price

6 Select Final Price
5

Price Method

Competitor
Analysis
Estimate
Costs

Determine
Demand
1 Pricing Objective
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 8 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 9 of 33

Determining Demand
Price sensitivity
Estimating demand
curves
Price Elasticity of
Demand

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Slide 10 of 33

Estimating Costs
Deman
d

Price
Ceiling
Price
Profit

Price Floor

Costs

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Slide 11 of 33

Estimating Costs
Types of costs

Fixed Costs
(overhead)

Variable Costs

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Total Costs

Slide 12 of 33

Analyzing Competitors
Offers
Price
Costs

Reacti
on

Worth to Customer
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 13 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

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e
r
u
g
Fi 4.4
1

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 15 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 16 of 33

Target-Return Pricing

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Slide 17 of 33

Perceived-Value Pricing
Customers
perceived-value

Performance $$$
Warranty $
Customer support $
Reputation $$

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 18 of 33

Value Pricing
EDLP

THOUSANDS OF

LOW
PRICES
EVERY
DAY

Level
of
Qualit
y

throughout the store

P
1

C1

P
2

C2

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

High

Pricin
Low
g

Slide 19 of 33

Going-Rate Pricing

Commodities

Follow the
Leader

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Slide 20 of 33

Selecting the Final Price

Impact on
others

Bran
d
Quali
ty
Pricing
Policies

Gain-and-riskCopyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 21 of 33

Adapting the Price

Geographic
Pricing
Price
Discounts
and
Allowances
Differentiated
Pricing

Promotional
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 22 of 33

Dealing with Price Changes

Raising
Prices

Cutting
Prices

Competitor
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Slide 23 of 33