PowerPoint Slides to accompany Rix Marketing: A Practical Approach 7e Bargain! You Get What You Pay For Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: What is Price? What is Price? • The money value of an item • What you pay for what you get Marketers give a special meaning to the term price: • Tangible aspects o quantity, quality, performance and features • Intangible aspects o status, approval, security, peace of mind Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Strategic Price Setting Learn more on pages 348 - 349 Strategic Price Setting Stage 1: Set a pricing goal Profit-oriented Sales-oriented Status quo-oriented Stage 2: Consider costs, demand and competitors Estimate sales around the expected price Consider marketing mix elements Cost-based Entry price Fixed or flexible pricing Loss leaders Stage 3: Set the base price Demand-based Competition-based Stage 4: Adjust the base price Discounts and allowances Price lining Recommended retail price Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Freight charges Psychological pricing Next: Pricing Goals Learn more on page 349 • Profit oriented goals o maximise gross profit o achieve target ROI • Sales oriented goals o achieve target sales volume o achieve target market share Pricing Goals Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies • Status-quo goals o stabilise prices o meet competition o ‘don’t rock the boat’ Next: Factors Influencing Price Learn more on pages 350 - 352 Factors Influencing Price Before setting a base or list price marketers need to consider: • Demand factors o expected price range o elasticity of demand o other marketing mix elements •Cost factors fixed and variable costs o total cost at different volumes o Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies • Competitive factors o are we a price maker or price taker? Next: Elasticity of Demand Learn more on pages 352 - 360 Elasticity of Demand Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Product Cost at Various Levels of Output Learn more on pages 354 - 356 Measuring Product Cost at Various Levels of Output Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Setting Base Price Learn more on pages 358 - 360 Setting Base Price In practice, marketers set their base (or list) price by: Adding a profit margin to cost o Estimating demand (how many will sell) at various prices o Pricing above, below or the same level as their competitors’ prices o Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Break-even Analysis: A Useful Tool Learn more on pages 360 - 370 Break-even Analysis: A Useful Tool Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Marketing Pricing: Price Skimming Learn more on pages 365 - 366 Market Entry Pricing: Price Skimming Setting price at or above our most expensive competitor price and highest customers’ expected price. • Can establish a premium image • Gives price flexibility • Works best when: o new product is distinctive o demand is inelastic o PLC is in the early stages o patents or other technology protect the product Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Marketing Entry Pricing: Penetration Pricing Learn more on pages 370 - 371 Marketing Entry Pricing: Penetration Pricing Setting a price below our cheapest competitor price and lower level of customers’ expected price. • Can achieve fast high-volume sales • Discourages competitors • Works best when: o demand is elastic o economies of scale are possible o strong and fast competition is expected Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: What Kind of Discount is This? Learn more on page 371 Price Adjustment Strategies Marketers adjust their base prices in various ways: •Discounts and allowances quantity discounts o trade discounts o settlement discounts o promotion discounts o • Geographic pricing ex-factory o uniform delivered o zone delivered o freight absorption o Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies • Other pricing tactics flexible pricing o price lining o odd pricing o loss leader pricing o recommended retail price o Next: What Kind of Discount is This? Learn more on pages 371 - 382 What Kind of Discount is This? Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Changing prices Changing Prices Marketers change their price in order to: • Recover cost increases • Clear excess stock • Win market share • Promote particular products • Achieve sales budgets Marketers need to consider competitor motives and reactions when making or responding to price changes. Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies Next: Five Minute Quiz Learn more on pages 382 - 383 Five Minute Quiz 1. 2. 3. 4. 5. Define price from a marketing perspective List three common pricing goals Define price elasticity of demand List four types of discounts offered by firms List four alternative ways of allowing for freight costs in a firm’s price Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies