marketing planning session 7.pricing

8/10/2019 Marketing Planning Session 7.Pricing

1/27


2/27

Wide spectrum of consumers-VeryAffluent to Very Poor

Least understood of all financialdecisions

Influenced by front line people

Considerable discretion at lower levels


3/27


4/27

Demand

Supply

Competitor Offerings Marketing Mix Factors

Environmental Considerations


5/27

Price Bands

Reference Prices

Price Quality Inferences Price Cues

Special Offers


6/27

Survival

Maximum Current Profit

Maximum Market Share Maximum Market Skimming

Product-Quality Leadership


7/27

Purchase is infrequent

No substitute products from competitors

Do not readily notice the higher price Slow to change buying habits

Think higher prices are justified

Price a small part of total cost ofobtaining, operating and servicing theproduct


8/27

Product is more distinctive

Buyers are less aware of substitutes

Buyers cannot compare options easily Expenditure a small part of buyers income

Expenditure a small part of total purchase

Part of the cost borne by another party Used in conjunction with another product

previously bought


9/27

Surveys

Competitors

Customers

Price Experiments

In-store

Online

Statistical Analysis

Longitudinal (Over Time)

Cross Sectional (Different Locations)


10/27

Reduction in price causes marginalincrease in demand- Inelastic Demand

Reduction in price causes substantialincrease in demand- Elastic Demand

Two Way Elasticity


11/27

Rs. 15

Rs. 10

100 # 105 #

Rs. 15

Rs. 10

100 # 150 #

Quantity Demanded Per Period

Elastic DemandInelastic Demand


12/27

Fixed vs. Variable Costs

Learning Curve

Plant Capacity vs Cost Curves Activity Based Costs

Target Costs


13/27

Rs. 100

100,000 200,000

Accumulated Production

Rs. 80

Rs. 60

300,000 400,000


14/27

Price

Value

Features


15/27

Price Change

New Offering

New Features Enhanced Advertising

Distribution Channel Modification


16/27

Markup Pricing

Target Return Pricing

Perceived Value Pricing Value Pricing

Going Rate Pricing

Auction Type Pricing


17/27

English Auction- One Seller, Many buyerAscending Bids by Buyers

Dutch Auction 1- One Seller, ManyBuyers, Descending Bids by Seller

Dutch Auction 2- One Buyer- Many

Sellers- Descending Bid by Sellers


18/27

Products at several price points withdiffering Value Proposition

Prevents competitor from entering Matches Competitor Offering at different

value points


19/27

Impact of Other Marketing Activities

Company Pricing Policies

Gain and Risk Share Pricing Impact of Pricing on Other Parties


20/27

EDLP: Perception of low price

High Low Pricing: Perception of

occasional high value


21/27

Purchase Volume

Purchase Location

Distribution Channel State of Demand

Inventory Levels

Seasonality/ Time of Day Consumer Promotions

Trade Promotions


22/27

Volume

Long Term Contract

Favourable Payment Terms Additional Services by Intermediary or

Customer


23/27

Loss Leader Pricing

Cash Rebates

Low Interest Financing Longer Repayment Terms

Warranties and Service Cost

Psychological Discounting


24/27

Customer Segment Pricing

Product Form Pricing

Image Pricing Channel Pricing

Location Pricing

Time Pricing


25/27


26/27

Price Escalation Clause

Withdrawal of standard discounts

Unbundling services

Shrinking quantity

Lower cost ingredients

Removing product features

Economy brands at marginally lowerprices


27/27

marketing planning session 7.pricing

Documents