chapter 16kisi.deu.edu.tr/banu.atrek/mba 5011 strategic marketing management... · skimming....
TRANSCRIPT
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Chapter 16
Developing Pricing Strategies and
Programs
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Understanding Pricing
• Pricing in a digital world
Get instant vendor price comparisons Check prices at the point of purchase Name your price and have it met Get products free Monitor customer behavior & tailor offers Give customers access to special prices Negotiate prices online or even in person
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Understanding Pricing
• A changing pricing environment
– Sharing economy
– Bartering
– Renting
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SHARING ECONOMY
• Time banking– https://www.youtube.com/watch?v=Lgq5seXb
21M• Co-Working Spaces
– https://www.youtube.com/watch?v=FKG-Jaqp3KQ
• Food Sharing– EatWith
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Understanding Pricing
• How companies price– Small companies: boss– Large companies: division/product line
managers• How companies should price
– Understanding of consumer pricing psychology
– a systematic approach to setting, adapting, and changing prices
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Consumer Psychology and Pricing
Reference prices
Price-quality inferences
Price endings
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Reference Prices
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Setting the Price
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Step 1: Selecting the Pricing Objective
Survival Maximum current profit
Maximum market share
Maximum market
skimming
Product-quality leadership
Other objectives
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Step 2:Determining Demand
• Price sensitivity• Estimating demand
curves– Surveys, price
experiments, & statistical analysis
• Price elasticity of demand
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Figure 16.1Inelastic And Elastic Demand
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Price Sensitivity
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Step 3: Estimating Costs
• Types of costs and levels of production– Fixed vs. variable costs– Total costs– Average cost
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Step 3: Estimating Costs
• Accumulated production– Experience/learning curve
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Step 3: Estimating Costs
• Target costing– Price less desired profit margin
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Step 4: Analyzing Competitors’ Prices
• Firm must take competitors’ costs, prices, & reactions into account– Value-priced competitors
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Step 5: Selecting a Pricing Method
• Figure 16.4: three major considerations in price– Costs = price floor– Competitors’ prices =
orienting point– Customers’ assessment of
unique features = price ceiling
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Step 5: Selecting a Pricing Method
• Markup pricing– Add a standard markup to the product’s cost
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Step 5: Selecting a Pricing Method
• Target-return pricing– Price that yields its target rate of return on
investment
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Step 5: Selecting a Pricing Method
• Perceived-value pricing– Based on buyer’s image of product, channel
deliverables, warranty quality, customer support, and softer attributes (e.g., reputation)
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Step 5: Selecting a Pricing Method
• Value pricing• EDLP
– High-low pricing• Going-rate pricing
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Step 5: Selecting a Pricing Method
English (ascending)
Dutch (descending)
Sealed-bid
• Auction-type pricing
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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
• Additional factors to select final price:
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IMPACT OF OTHER MARKETING ACTIVITIES
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Adapting the Price
• Geographical pricing– Barter : no money, no 3rd party– Compensation deal: % cash, rest in products– Buyback arrangement: plant, equipment,
technology, accepts partial payment with products
– Offset: seller receives full cash, has to spend an amount in that country
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Adapting the Price• Price discounts and allowances
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Adapting the Price
• Loss-leader pricing: Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. This pays if the revenue on the additional sales compensates for the lower margins on the loss-leader items.
• Special event pricing: Sellers will establish special prices in certain seasons to draw in more customers
• Special customer pricing: Sellers will offer special prices exclusively to certain customers
• Promotional pricing:
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• Low-interest financing: Instead of cutting its price, the company can offer low-interest financing
• Longer payment terms• Warranties/service contracts: adding a free or low-cost
warranty or service contract
• Psychological discounting: This strategy sets an artificially high price and then offers the product at substantial savings
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Adapting the Price
• Price discrimination
Customer-segment pricing
Product-form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
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Adapting the Price
• Price discrimination– Yield pricing
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Initiating and Responding to Price Changes
• Initiating price cuts– Excess plant capacity– Domination of market
• Price-cutting traps– Low-quality – image?– Fragile market share – loyalty?– Shallow pockets- high priced competitor?– Price war
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Initiating and Responding to Price Changes
• Initiating price increases
Delayed quotation pricing long lead times
Escalator clauses- inflation
Unbundling Reduction of discounts
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Initiating and Responding to Price Changes
• Anticipating competitive responses
• Responding to competitors’ price changes
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