13
Pricing
Strategies
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-1
C HAPTER O BJECTIVES
1. What are the roles of price and value in the
marketing mix? How do market structures,
costs, and demand affect prices?
2. What are the most important market
factors influencing pricing decisions?
3. How do marketers use pricing strategy and
pricing objectives to achieve their goals?
4. What procedures and strategies do
marketers use when making pricing
decisions?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-2
O BJECTIVE 1
What are the roles of price and
value in the marketing mix? How
do market structures, costs, and
demand affect prices?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-3
D
E
A Price is the exchange value of a
F
I
N
product or service in the marketplace.
E
D
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-4
VALUE
E
X
P
L
A
I
N Product
Value
E Benefits
D Value = Benefits – Costs
Service
Benefits Price &
Other
Costs
Brand
Benefits
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-5
More
E Reliable
X
P
L Design Performance
A
I
N
E
Value
D
Creation
Reduce Longer
Costs Lasting
Safety
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-6
E STABLISHING P RICES
A
P
P
L
I
Price
E
D
Place Product
Promotion
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-7
M ARKET S TRUCTURE
A
Monopoly Oligopoly
P
P
L
I
E
D
Pure Competition
Monopolistic Competition
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-8
C OST -B ASED P RICING
A
P
P
L
I Profit Revenue Costs
E
D
Price x Units Sold
Fixed Costs + Variable Costs
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-9
C OST -B ASED P RICING
A
P
P
L
I
E
D
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-10
C OST -P LUS P RICING
A
P For a product costing $12.00…
P
L Markup % on Margin on
Selling Price
I Cost Selling Price
E
D 11.0% 10% $13.33
17.6% 15% $14.12
25.0% 20% $15.00
33% 25% $16.00
42.8% 30% $17.14
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-11
B REAK - EVEN P OINT
A Fixed Cost = $40k; Variable Cost = $5; Selling Price = $10
P
P
L
I
E
D
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-12
D ETERMINATION OF D EMAND
A
P
Price
P
L
I
E
D $0.50
$0.25
$0.10
100K 200K 300K
Quantity
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-13
O BJECTIVE 2
What are the most important
market factors influencing
pricing decisions?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-14
D Pricing Practices are considerations
E
F
I
(such as legal requirements or bidding
N
E
D
practices) that must be taken into
account when establishing a price for a
product or service.
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-15
P RICING P RACTICES
E
X
P Legal
L
A Requirements
I
N
E Competitive
D
Bidding
Global Market
Environment
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-16
P RICE R EDUCTION E FFECT
A
P
P
.71¢
L .89¢
I 66%
E Increase
D
.69¢
Kenneth Wisniewski and Robert Blattberg at the University of Chicago's Center for Research in Marketing
222%
Increase
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-17
O BJECTIVES 3 & 4
How do marketers use pricing
strategy and pricing objectives to
achieve their goals?
What procedures and strategies
do marketers use when making
pricing decisions?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-18
D
E
A Pricing Strategy identifies what
F
I
N
a business will charge for its products
E
D or services.
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P RICING O BJECTIVES
E
X
P
$ Profitability
L
A
I
N $ Volume
E
D
$ Meeting Competition
$ Prestige
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P RICING S TRATEGY
A
P
1 • Develop Price Objectives
P
L
I 2 • Estimate Demand
E
D
3 • Determine Costs
4 • Evaluate the Pricing Environment
5 • Choose Pricing Strategy
6 • Develop Pricing Tactics
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-21
N EW P RODUCT P RICING
A
P
P Product outperforms others
L
I
E Early adopters value product
D
Skimming Demand is inelastic
Expected demand can’t be met
High quality is desired position
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-22
N EW P RODUCT P RICING
A
P
P Higher volume reduces costs
L
I
E Low price deters competitors
D
Penetration Demand is elastic
Buyer’s price is sensitive
Competitor imitation possible
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-23
P RICING S TRATEGIES
A
P Tiered
P Storefront
L Pricing Pricing
I
E
D
Online Dynamic
Pricing Pricing
Forward
Auction
Auction
Pricing
Reverse
Auction
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-24
P ORTFOLIO P RICING
A Price
P ceiling $$$
P
L
I
E
brand/product line
D
Price range for
Product 3
Product 2
Product 1
Price
floor $ Customer’s willingness to pay
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-25
P RICE A DJUSTMENT S TRATEGIES
A
P
P Cash Discount
L
I
E
D Quantity Discount
Trade-in
Rebate
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-26
V ISUAL S UMMARY
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-27
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
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