pricing policy prerequisites: resource 265 "targeting your customers" resource 1549...

Pricing policy

Prerequisites:

Resource 265 "Targeting your customers"

Resource 1549 "Positioning your offer"

Resource 268 "Presentation of the marketing mix"

Objectives in terms of expertise

Act on the price variable Know how to propose a retail price Know how to argue in favour of this

choice Know how to change the price

Objectives in terms of content

A definition of the concept Fixing methods Reactions to changes in price

Laurence Chérel and Catherine Madrid


The transverse nature of the teaching:

DEFINING THE PRICE


THE PRICE:

A monetary expression of the value Value appreciated in exchange for an

expected satisfaction

Resource to consult: The importance of perceived value


Value is perceived:

Resource to consult: 2012 price image barometerBy OC&C Strategy Consultants

Notion of perceived value: in time


In effort


FIXING METHODS


Fixing a price:

Traditional and other more recent methods

N.B. choose just one fixing method


TRADITIONAL METHODS


INTERNAL ASPECTS EXTERNAL ASPECTS

Acceptability by the market

Competition

Regulations

Marketing goal

Positioning

Cost analysis

PRICE

Resource to consult: study of the acceptability of a price by the market

The traditional method

High unit margin Low unit margin

High sales volume Penetration policy

Low sales volume Skimming policy


Comparison between skimming and penetration

PENETRATION POLICY Fix a price that maximizes demand

– to make your mark from the outset in a large section of the market

In cases where:– demand is elastic depending on price,– the company has sufficient production

capacity– and introduces appropriate distribution and

communication policies


SKIMMING POLICY

Sell at a high price by restricting yourself to a group of buyers who are prepared to pay a high price

In cases where:– demand is inelastic depending on price,– a fairly short life cycle,– the product can be rapidly imitated,– a low, fairly unprofitable price.


RECENT METHODS


The role of price against a background of bi-polar consumption

Hallmark attribute for the choice of a basic product– the individual is looking for functional value

at a lower price– in a hyper-competitive environment

A challenge to the traditional price-fixing model


Price and contemporary context

quality

Price

Basic product

Skimming policy

Penetration policy

1,88 €/kg2,80 €/kg

3,73 €/kg

Example of a contemporary price-fixing context

The target price (or alignment with the competition)

The price war has an impact on– The consumer– Human resources management

The need to differentiate yourself in other ways to get away from the price war environment

Resource to consult: “too many low prices kill low prices”


Flunch: "a menu idea with tasty dishes and big portions at a very nice price: 4€95."

The New Deal offer Creating new market conditions by

differentiating yourself in other ways Offering better value for money through

innovation. Resource to consult: household appliance rental at

Intermarché


An example of a new deal offerHP envy 5640

The Every Day Low Price (EDLP) Aim: to put an end to promotional one-

upmanship by offering low, stable prices How: through a better organization of all the

company’s processes,


E.D.L.P.: examples:

The Club Méditerranée Best Offer guarantee

Little Extra: pleasure at low prices


SummaryAdvantages Limitations

Skimming Adapted to products that require high investment

Is there a target consumer segment?

Penetration To make your mark rapidly in the market

The company strategy needs to favour an appropriate sales volume, and the consumer must be sensitive to a low price

Target price Adaptation to market expectations

Participation in a price war environment

EDLP A source of strong differentiation

The company’s processes must be adapted

New Deal A source of strong differentiation

The company offer must be adapted

The price-fixing process


REACTIONS TO CHANGES IN PRICE


Buyers’ reactions to changes in price

Possible perceptions of a reduction in price– the product is selling badly

– the product will be replaced

– the quality has fallen

– the price is going to fall further, it would be better to wait

Possible perceptions of a rise in price– strong demand and a risk of shortages

– risk of a further increase

– the price is fixed at the maximum tolerated by the market

Competitors’ reactions to changes in price

Problem of anticipating the competitor’s reactions– analyze the statistics of his previous

reactions– analyze his strategy


The company’s reactions to its competitors’ price changes

Maintain your price– and do nothing– counter-attack in other areas

Reduce your price Increase and counter-attack on the

product


Conclusion:

How to fix a price (slide nos. 25 and 26) How to adjust it to competitors’

manœuvres

Bibliography

Desmet Pierre (2008), Le prix , MBA - Editions d’Organisation – 2nd edition / Eyrolles - Paris, 01/01/2008

KOTLER Philip, DUBOIS Bernard (2012). - Marketing management. – 14th edition. - Paris: Pearson Education, XL-841 pages. (chap 14. Choisir une stratégie de prix )

Revue Décision Marketing n° 6 dedicated to prices

Check your knowledge!


pricing policy prerequisites: resource 265 "targeting your customers" resource 1549...

Documents

catherine madridthe

catherine madrid price

catherine madridlaurence

pricelaurence chrel

unprofitable price

price variable

nice price

catherine madridcomparison