principles of marketing lecture-27. summary of lecture-26
TRANSCRIPT
Premium Strategy
Overcharging Strategy
Overcharging Strategy
Good-Value Strategy
Good-Value Strategy
Economy Strategy
Economy Strategy
Price
Higher Lower
Higher
Lower
Qu
alit
y
Discount and Allowance Pricing
Segmented Pricing
Psychological Pricing
Promotional Pricing
Geographical Pricing
International Pricing
InitiatingPrice
Increases
CompetitorReactionsTo Price Changes
Initiating Price Cuts
Buyer Reactions
to PriceChanges
Price Changes
Initiating Price Cuts is Desirable When a Firm:
–Has excess capacity
–Faces falling market share due to price competition
–Desires to be a market share leader
Price Increases are Desirable:
–If a firm can increase profit, faces cost inflation, or faces greater demand than can be supplied.
Alternatives to Increasing Price
–Reducing product size, using less expensive materials, unbundling the product.
Buyer reactions to price changes must be considered.
Competitors are more likely to react to price changes under certain conditions.–Product is uniform–Buyers are well informed
Hold Current Price;Continue to MonitorCompetitor’s Price.
Hold Current Price;Continue to MonitorCompetitor’s Price.
Reduce PriceReduce Price
Raise PerceivedQuality
Raise PerceivedQuality
Improve Quality& Increase PriceImprove Quality& Increase Price
Launch Low-Price“Fighting Brand”
Launch Low-Price“Fighting Brand”
Has Competitor CutPrice?
Has Competitor CutPrice?
Will Lower Price Negatively Affect Our
Market Share & Profits?
Will Lower Price Negatively Affect Our
Market Share & Profits?
Can/ Should EffectiveAction be Taken?
Can/ Should EffectiveAction be Taken?
Yes
No
No
No
Respond To Price Changes Only If… –Market share / profits will be negatively affected if nothing is changed.
Four strategies
Reduce price
Raise perceived quality
Improve quality and increase price
Launch a low price fighting brand
Price Has Many NamesPrice Has Many Names
Rent
Fee
Rate
Commission
Tuition
Fare
Toll
Premium
Bribe
Salary
Wage
Interest
Tax
Price–The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.
Internal FactorsInternal Factors
PricingDecisionsPricing
Decisions
External FactorsExternal Factors
Target Market
Positioning Objectives
Market andDemand
Competitors’ Costs, Prices, and Offers
Other External FactorsEconomic Conditions
Reseller NeedsGovernment Actions
Social Concerns
Pri
ce
Quantity Demanded per Period
A. Inelastic Demand - Demand Hardly Changes Witha Small Change in Price.
P2
P1
Q1Q2
Pri
ce
Quantity Demanded per Period
P’2
P’1
Q1Q2
B. Elastic Demand -Demand Changes Greatly Witha Small Change in Price.
Ru
pee
s (i
n t
ho
usa
nd
s)R
up
ees
(in
th
ou
san
ds)12001200
10001000
800800
600600
400400
200200
00
Total costTotal cost
Fixed costFixed cost
TargetTarget profitprofit
Total revenueTotal revenue
1010 2020 3030 4040 5050
Sales volume in units (thousands)Sales volume in units (thousands)
Break-even pointBreak-even point
Product Line PricingProduct Line PricingProduct Line PricingProduct Line Pricing
Optional-Product PricingOptional-Product PricingOptional-Product PricingOptional-Product Pricing
Captive-Product PricingCaptive-Product PricingCaptive-Product PricingCaptive-Product Pricing
By-Product PricingBy-Product PricingBy-Product PricingBy-Product Pricing
Product-Bundle PricingProduct-Bundle PricingProduct-Bundle PricingProduct-Bundle Pricing
ProductMix
PricingStrategies
ProductMix
PricingStrategies
Premium Strategy
Overcharging Strategy
Overcharging Strategy
Good-Value Strategy
Good-Value Strategy
Economy Strategy
Economy Strategy
Price
Higher Lower
Higher
Lower
Qu
alit
y
Discount and Allowance Pricing
Segmented Pricing
Psychological Pricing
Promotional Pricing
Geographical Pricing
International Pricing
InitiatingPrice
Increases
CompetitorReactionsTo Price Changes
Initiating Price Cuts
Buyer Reactions
to PriceChanges
Price Changes
Hold Current Price;Continue to MonitorCompetitor’s Price.
Hold Current Price;Continue to MonitorCompetitor’s Price.
Reduce PriceReduce Price
Raise PerceivedQuality
Raise PerceivedQuality
Improve Quality& Increase PriceImprove Quality& Increase Price
Launch Low-Price“Fighting Brand”
Launch Low-Price“Fighting Brand”
Has Competitor CutPrice?
Has Competitor CutPrice?
Will Lower Price Negatively Affect Our
Market Share & Profits?
Will Lower Price Negatively Affect Our
Market Share & Profits?
Can/ Should EffectiveAction be Taken?
Can/ Should EffectiveAction be Taken?
Yes
No
No
No