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Kotler • Keller Phillip Kevin Lane Marketing Management • 14e

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Kotler • KellerPhillip Kevin Lane

Marketing Management • 14e

Developing Pricing Strategies and Programs

Chapter 14

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 3 of 33

Discussion Questions

1. How do consumers process and evaluate prices?

2. How should a company set prices initially for products or services?

3. How should a company adapt prices to meet varying circumstances and opportunities?

4. When should a company initiate a price change?

5. How should a company respond to a competitor’s price change?

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 4 of 33

Marketing Mix

PromotionPlace

Revenue Producer

Cost

Cost

Cost

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 of 33

Pricing

Bargaining

$31.50

$33.50

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 6 of 33

Changing Price Environment

Instant Price Comparisons

I’ll pay $235.00

Name Your Own Price

Get Products Free

Buyers

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 7 of 33

$29.99 $19.99 $24.99

Changing Price Environment

Sellers

Monitor Customers

Selective Pricing

Negotiate Prices

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 8 of 33

How Companies Price

Pricing Department

Small Business Owner

Product-line Managers (w/guidance)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 9 of 33

Consumer Psychology and Pricing

Reference Prices

Price-Quality Inferences

Price Endings$1.99

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 10 of 33

A Black T-Shirt

Armani - $275

Gap - $14.90

H&M - $7.90

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 11 of 33

Select Final Price

Setting the Price

1

Price Method

Competitor Analysis

2

3

4

5

6

Estimate Costs

Determine Demand

Pricing Objective

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 12 of 33

Selecting the Pricing Objective

SurvivalMaximum Current ProfitMaximum Market ShareMaximum Market SkimmingProduct-Quality LeadershipOther Objectives

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 13 of 33

Determining Demand

Price sensitivityEstimating demand curvesPrice Elasticity of Demand

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 14 of 33

Figu

re

14.1 Inelastic and Elastic Demand

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 15 of 33

Estimating Costs

Demand Price Ceiling

Costs

Profit

Price

Price Floor

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 16 of 33

Estimating Costs

Fixed Costs (overhead) Variable Costs Total Costs

Types of costs

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 17 of 33

Figu

re

14.2 Costs at Varying Levels of Production

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 18 of 33

Estimating Costs

Accumulated Production

Experience Curve(Learning Curve)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 19 of 33

Estimating Costs

Target Costing

Market research Design engineers

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 20 of 33

Figu

re

14.3 The Experience Curve

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 21 of 33

Analyzing Competitors’ Offers

“A”“B”

Worth to Customer

Costs Reaction

Price

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 22 of 33

Selecting a Pricing Method

Pricing Methods• Markup • Target-return• Perceived-Value• Value• Going-rate• Auction-type

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 23 of 33

Figu

re

14.4

Three Cs Model for

Price Setting

Ceiling price

Customers’ assessment of unique product

features

Orienting point

Competitors’ prices and prices of substitutes

Costs

Floor Price

High Price(No possible

demand at this price)

Low Price(No possible

profit at this price)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 24 of 33

Markup Pricing

Variable cost per toaster $10

Fixed costs $300,000

Expected unit sales 50,000

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 25 of 33

Target-Return Pricing

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 26 of 33

Figu

re

14.5 Target-Return Pricing

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 27 of 33

Perceived-Value Pricing

Customer’s perceived-value

• Performance $$$• Warranty $• Customer support $• Reputation $$

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 28 of 33

Value Pricing

P1 P2C1 C2

Level of Quality

THOUSANDS OF

LOW PRICES EVERY DAYthroughout the store

EDLP

High

LowPricing

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 29 of 33

Going-Rate Pricing

Follow the Leader

Commodities

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 30 of 33

Auction PricingEnglish auction

(ascending bids)

Dutch auction (descending bids)

Sealed-bid auction

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 31 of 33

Selecting the Final Price

Brand Quality

Impact on others

Pricing Policies

Gain-and-risk-sharing

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 32 of 33

Adapting the PriceGeographic Pricing

Price Discounts and Allowances

Promotional Pricing

Differentiated Pricing

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 33 of 33

Dealing with Price Changes

Competitor Moves

Raising Prices

Cutting Prices