kotlerkeller chapter 14

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MARKETING MANAGEMENT 12th Canadian edition: 

MARKETING MANAGEMENT 12th Canadian edition 14 Developing Pricing Strategies and Programs Dr. Sylvain Charlebois, University of Regina Copyright © 2007 Pearson Education Inc.

Chapter Questions: 

Chapter 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 challenge? Copyright © 2007 Pearson Education Inc.

Synonyms for Price: 

Synonyms for Price Rent Tuition Fee Fare Rate Toll Premium Honorarium Special assessment Bribe Dues Salary Commission Wage Tax Copyright © 2007 Pearson Education Inc.

Common Pricing Mistakes: 

Common Pricing Mistakes Determine costs and take traditional industry margins Failure to revise price to capitalize on market changes Setting price independently of the rest of the marketing mix Failure to vary price by product item, market segment, distribution channels, and purchase occasion Copyright © 2007 Pearson Education Inc.

Consumer Psychology and Pricing: 

Consumer Psychology and Pricing Reference prices Price-quality inferences Price endings Price cues

Table 14.1 Possible Consumer Reference Prices: 

Table 14.1 Possible Consumer Reference Prices “Fair price” Typical price Last price paid Upper-bound price Lower-bound price Competitor prices Expected future price Usual discounted price Copyright © 2007 Pearson Education Inc.

Table 14.2 Consumer Perceptions vs. Reality for Cars: 

Table 14.2 Consumer Perceptions vs. Reality for Cars Overvalued Brands Land Rover Kia Volkswagen Volvo Mercedes Undervalued Brands Mercury Infiniti Buick Lincoln Chrysler Copyright © 2007 Pearson Education Inc.

Price Cues: 

Price Cues “Left to right” pricing ($299 versus $300) Odd number discount perceptions Even number value perceptions Ending prices with 0 or 5 “Sale” written next to price Copyright © 2007 Pearson Education Inc.

When to Use Price Cues: 

When to Use Price Cues Customers purchase item infrequently Customers are new Product designs vary over time Prices vary seasonally Quality or sizes vary across stores Copyright © 2007 Pearson Education Inc.

Steps in Setting Price: 

Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price Copyright © 2007 Pearson Education Inc.

Step 1: Selecting the Pricing Objective: 

Step 1: Selecting the Pricing Objective Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership Copyright © 2007 Pearson Education Inc.

Step 2: Determining Demand: 

Step 2: Determining Demand Price sensitivity Estimating demand curves Price elasticity of demand Copyright © 2007 Pearson Education Inc.

Step 3: Estimating Costs: 

Step 3: Estimating Costs Types of Costs Accumulated Production Activity-Based Cost Accounting Target Costing Copyright © 2007 Pearson Education Inc.

Cost Terms and Production: 

Cost Terms and Production Fixed costs Variable costs Total costs Average cost Cost at different levels of production Copyright © 2007 Pearson Education Inc.

Step 4: Analyzing Competitors’ Costs, Prices and Offers: 

Step 4: Analyzing Competitors’ Costs, Prices and Offers Identify nearest price competitors Take competitors’ features and prices into account Make decision to charge more, the same or less than competitors Monitor competitors’ reaction to your pricing strategy

Step 5: Selecting a Pricing Method: 

Step 5: Selecting a Pricing Method Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing Copyright © 2007 Pearson Education Inc.

Auction-Type Pricing: 

Auction-Type Pricing English auctions Dutch auctions Sealed-bid auctions Copyright © 2007 Pearson Education Inc.

Step 6: Selecting the Final Price: 

Step 6: Selecting the Final Price Impact of other marketing activities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties Copyright © 2007 Pearson Education Inc.

Price-Adaptation Strategies: 

Price-Adaptation Strategies Geographical pricing Discounts/allowances Promotional pricing Differentiated pricing Copyright © 2007 Pearson Education Inc.

Price-Adaptation Strategies: 

Price-Adaptation Strategies Countertrade Barter Compensation deal Buyback arrangement Offset Discounts/ Allowances Cash discount Quantity discount Functional discount Seasonal discount Allowance Copyright © 2007 Pearson Education Inc.

Promotional Pricing Tactics: 

Promotional Pricing Tactics Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting Copyright © 2007 Pearson Education Inc.

Differentiated Pricing and Price Discrimination: 

Differentiated Pricing and Price Discrimination Customer-segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing Copyright © 2007 Pearson Education Inc.

Increasing Prices: 

Increasing Prices Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts Copyright © 2007 Pearson Education Inc.

Brand Leader Responses to Competitive Price Cuts: 

Brand Leader Responses to Competitive Price Cuts Maintain price Maintain price and add value Reduce price Increase price and improve quality Launch a low-price fighter line Copyright © 2007 Pearson Education Inc.