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Kotler • Keller Phillip Kevin Lane Marketing Management • 14e
Kotler • Keller Phillip Kevin Lane
Marketing Management • 14e
Developing Pricing Strategies and Programs
Copyright © 2012 Pearson Educa=on, Inc. Publishing as Pren=ce Hall Slide 3 of 33
Discussion Ques=ons
1. How do consumers process and evaluate prices?
2. How should a company set prices ini=ally for products or services?
3. How should a company adapt prices to meet varying circumstances and opportuni=es?
4. When should a company ini=ate a price change?
5. How should a company respond to a compe=tor’s price change?
Copyright © 2012 Pearson Educa=on, Inc. Publishing as Pren=ce Hall Slide 4 of 33
Marke=ng Mix
Product Price
Promo=on Place
Revenue Producer
Cost
Cost
Cost
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Pricing
Bargaining
$31.50 $33.50
Price
Forms
Func=ons Components
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Changing Price Environment
Instant Price Comparisons PriceScan.com mySimon.com
I’ll pay $235.00
Name Your Own Price Priceline.com
Get Products Free
Buyers
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$29.99 $19.99 $24.99
Changing Price Environment
Sellers
Monitor Customers
SelecAve Pricing
NegoAate 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
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A Black T-‐Shirt
Armani -‐ $275
Gap -‐ $14.90
H&M -‐ $7.90
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Select Final Price
SeZng the Price
1
Price Method
Compe=tor Analysis
2
3
4
5
6
Es=mate Costs
Determine Demand
Pricing Objec=ve
Copyright © 2012 Pearson Educa=on, Inc. Publishing as Pren=ce Hall Slide 12 of 33
Selec=ng the Pricing Objec=ve
Survival Maximum Current Profit Maximum Market Share Maximum Market Skimming Product-‐Quality Leadership Other Objec=ves
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Determining Demand
Price sensiAvity EsAmaAng demand curves Price ElasAcity of Demand
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Inelas=c and Elas=c Demand
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Es=ma=ng Costs
Demand Price Ceiling
Costs
Profit
Price
Price Floor
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Es=ma=ng Costs
Fixed Costs (overhead) Variable Costs Total Costs
Types of costs
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Costs at Varying Levels of Produc=on
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Es=ma=ng Costs
Accumulated ProducAon
Experience Curve (Learning Curve)
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Es=ma=ng Costs
Target CosAng
Market research Design engineers
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The Experience Curve
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Analyzing Compe=tors’ Offers
“A” “B”
Worth to Customer
Costs Reac=on
Price
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Selec=ng a Pricing Method
Pricing Methods • Markup • Target-‐return • Perceived-‐Value • Value • Going-‐rate • Auc=on-‐type
Copyright © 2012 Pearson Educa=on, Inc. Publishing as Pren=ce Hall Slide 23 of 33
Three Cs Model for Price SeZng
Ceiling price
Customers’ assessment of unique product features
Orien=ng point
Compe=tors’ prices and prices of subs=tutes
Costs
Floor Price
High Price
(No possible demand at this price)
Low Price
(No possible profit at this price)
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Markup Pricing
Variable cost per toaster $10
Fixed costs $300,000
Expected unit sales 50,000
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Target-‐Return Pricing
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Target-‐Return Pricing
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Perceived-‐Value Pricing
Customer’s perceived-‐value
• Performance $$$ • Warranty $ • Customer support $ • Reputa=on $$
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Value Pricing
P1 P2 C1 C2
Level of Quality
THOUSANDS OF
LOW PRICES EVERY DAY throughout the store
EDLP
High
Low Pricing
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Going-‐Rate Pricing
Follow the Leader
Commodi=es
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Auc=on Pricing English aucAon (ascending bids)
Dutch aucAon (descending bids)
Sealed-‐bid aucAon
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Selec=ng the Final Price
Brand Quality
Impact on others
Pricing Policies
Gain-‐and-‐risk-‐sharing
Copyright © 2012 Pearson Educa=on, Inc. Publishing as Pren=ce Hall Slide 32 of 33
Adap=ng the Price Geographic Pricing
Price Discounts and Allowances
PromoAonal Pricing
DifferenAated Pricing
Copyright © 2012 Pearson Educa=on, Inc. Publishing as Pren=ce Hall Slide 33 of 33
Dealing with Price Changes
CompeAtor Moves
Raising Prices
Cu]ng Prices
