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1 3 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-1 Pricing Strategi es
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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-1
Pricing Strategie
s
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-2
CHAPTER OBJECTIVES
1. What are the roles of price and value in the marketing mix? How do market structures, costs, and demand affect prices?
2. What are the most important market factors influencing pricing decisions?
3. How do marketers use pricing strategy and pricing objectives to achieve their goals?
4. What procedures and strategies do marketers use when making pricing decisions?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-3
OBJECTIVE 1
What are the roles of price and value in the marketing mix? How do market structures, costs, and demand affect prices?
DEFINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-4
A Price is the exchange value of a
product or service in the marketplace.
EXPLAINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-5
VALUE
Value = Benefits – Costs
Service Benefits
Brand Benefits
Product Benefits
Price &OtherCosts
Value
EXPLAINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-6
Performance
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-7
ESTABLISHING PRICES
Price
ProductPlace
Promotion
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-8
MARKET STRUCTURE
Pure Competition
Oligopoly
Monopolistic Competition
Monopoly
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-9
COST-BASED PRICING
Profit Revenue Costs
Price x Units Sold
Fixed Costs + Variable Costs
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-10
COST-BASED PRICING
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-11
COST-PLUS PRICING
Markup % Margin Selling Price
10% 11.0% $13.33
15% 17.6% $14.12
20% 25.0% $15.00
25% 33% $16.00
30% 42.8% $17.14
For a product costing $12.00…
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-12
BREAK-EVEN POINT
Fixed Cost = $40k; Variable Cost = $5; Selling Price = $10
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-13
DETERMINATION OF DEMAND
100K 200K 300K
Quantity
$0.50
Pri
ce$0.25
$0.10
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-14
OBJECTIVE 2
What are the most important market factors influencing pricing decisions?
DEFINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-15
Pricing Practices are considerations
(such as legal requirements or bidding
practices) that must be taken into
account when establishing a price for a
product or service.
EXPLAINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-16
PRICING PRACTICES
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-17
PRICING PRACTICES
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-18
PRICE REDUCTION EFFECT
Kenneth Wisniewski and Robert Blattberg at the University of Chicago's Center for Research in Marketing
.89¢.71¢
66% Increase
.69¢
222% Increase
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-19
OBJECTIVES 3 & 4
How do marketers use pricing strategy and pricing objectives to achieve their goals?
What procedures and strategies do marketers use when making pricing decisions?
DEFINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-20
A Pricing Strategy identifies what
a business will charge for its products
or services.
EXPLAINED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-21
PRICING OBJECTIVES
Profitability$
$
$
$
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-22
PRICING STRATEGY
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-23
NEW PRODUCT PRICING
Skimming
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-24
NEW PRODUCT PRICING
Penetration
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-25
PRICING STRATEGIES
Storefront Pricing
Online Pricing
Tiered Pricing
Auction Pricing
Dynamic Pricing
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-26
PORTFOLIO PRICING
Customer’s willingness to pay
Price ceiling $$$
Price floor $
Product 1
Product 2
Product 3
Pric
e ra
nge
for
bran
d/pr
oduc
t lin
e
APPLIED
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-27
PRICE ADJUSTMENT STRATEGIES
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-28
VISUAL SUMMARY
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-29
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
