Principles of Marketing 12
advertisement
Pricing Strategies Chapter Ch t 12 Objectives Learn the major strategies for pricing imitative and new p products. Understand how companies find a set of prices that maximizes the profits from the total product mix. p 12- 1 Objectives Definitions Learn how companies adjust their prices to take into yp of account different types customers and situations. Know the key issues related to initiating and responding to price changes. p g Market--Skimming Pricing Market Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the g price. p high 12- 2 12- 4 Product Mix P i i Pricing Strategies St t i Definitions Market--Penetration Pricing Market Product Line Pricing Setting g a low price p for a new product in order to attract a large number of buyers and a large market share. Setting g price p steps p between product line items. P i points Price i t 12- 5 Product Mix P i i Pricing Strategies St t i 12- 7 Product Mix P i i Pricing Strategies St t i Optional--Product Pricing Optional CaptiveCaptive p -Product Pricing g Pricing optional or accessory products sold with the main product Supplemental software, software digital cameras, and printers sold with a new PC are examples Pricing products that must be used with the main product High margins are often set for supplies Services: twotwo-part pricing strategy Fixed fee plus a variable usage rate 12- 8 12- 9 Product Mix P i i Pricing Strategies St t i Product Mix P i i Pricing Strategies St t i Product Bundle Pricing By-Product B ByProd ct Pricing g Pricing bundles of products sold p together Common in fast food industry Pricing of low--value low by--products by t gett rid id off to them 12- 11 Price Adjustment Strategies Strategies Discount / allowance Segmented P Psychological h l i l Promotional o ot o a Geographical International Types of discounts Cash discount Quantity discount Functional ((trade)) discount Seasonal discount Allowances T d -in i allowances ll TradeTrade Promotional allowances 12- 13 12- 12 Price Adjustment Strategies Strategies Discount / allowance Segmented P Psychological h l i l Promotional o ot o a Geographical International Types of segmented pricing strategies: g Customer-segment CustomerProduct--form pricing Product Location pricing Time pricing Also called revenue or yield i ld managementt Certain conditions i t for f mustt exist segmented pricing to be effective 12- 15 Price Adjustment Strategies Strategies Discount / allowance Segmented P Psychological h l i l Promotional o ot o a Geographical International The price is used to say something about the product product. PricePrice-quality relationship Reference prices Differences as small as five cents can be important Numeric digits may have symbolic and visual qualities that psychologically influence the buyer Price Adjustment Strategies Strategies Discount / allowance Segmented P Psychological h l i l Promotional o ot o a Geographical International Temporarily pricing products below the list p price or even below cost Loss leaders SpecialSpecial-event pricing Cash rebates Low Low--interest financing, longer warranties, free maintenance Promotional pricing can have adverse effects 12- 17 Price Adjustment Strategies Strategies Discount / allowance Segmented P Psychological h l i l Promotional o ot o a Geographical International Types of geographic pricing strategies: FOBFOB-origin g pricing p g Uniform Uniform--delivered pricing p g Zone pricing Basing Basing--point pricing Freight Freight--absorption pricing 12- 21 12- 18 Price Adjustment Strategies Strategies Discount / allowance Segmented P Psychological h l i l Promotional o ot o a Geographical International Prices charged in a specific country depend on many factors Economic conditions Competitive situation Laws / regulations Distribution system Consumer perceptions Cost considerations 12- 22 Fig re 12-1: Figure 12 1 Assessing & Responding to Competitor’s Co pe o s Price ce C Changes a ges Price Changes Initiating Price Cuts is Desirable When a Firm: Has excess capacity it Faces falling market share due to price competition Desires to be a market share leader 12- 23 Price Changes 12- 25 Price Changes Methods of Increasing Price Price Increases are Desirable: D i bl Eliminating discounts Adding g higherhigher g -p priced units to the product line If a firm can increase profit, faces cost inflation, or faces greater demand th can be b than supplied. Alternatives to Increasing Price Reducing product size Using less expensive materials Unbundling the product 12- 26 12- 27 Price Changes Price Changes Competitors are more likely to react to price changes under certain conditions conditions. Respond To Price Changes Only If: Market share / profits will be negatively affected if nothing is changed. Effective action can be taken: Number of firms is small Product is uniform Buyers are well informed Reducing price Raising quality g perceived p q y Improving quality and increasing price Launching lowlow-price “fighting brand” 12- 29 Fig re 12-2: Figure 12 2 12- 30 Public Policy and Pricing Public Policy Issues c g in Pricing Pricing within Channel Levels Price Price--fixing Competitors can not work with each other to set prices Predatory pricing 12- 32 Firms may not sell below cost with the intention of punishing a competitor or gaining higher longlong-run profits or running a competitor out of business. business 12- 33 Public Policy and Pricing Pricing across Channel Levels Price discrimination Retail price maintenance Deceptive p pricing p g Bogus reference / comparison pricing Scanner fraud Price confusion 12- 34
