Pricing Strategy
Group 4 – Section B
Alex Brown
Luis Cavero
Amedeo Giacomantonio
Unni Pedersen
Jung-Ho Song
Tetsuma Suzuki
Aligning Price with Perceived Value
“ Price communicates to the market the company‘s intended value
positioning of its product or brand“, Kotler
High
Price Paid
MISSED
OPPORTUNITY
UNHARVESTED
VALUE
Low
High
Low
Customer‘s Perceived Value
The 6-Step Pricing Decision Process
1
1.
2.
3.
4.
5.
6.
2
3
4
5
6
Select the pricing objective
Determine demand
Estimate costs
Analyze competitor prices and offers
Select a pricing method
Select a final price
Applying the 6-step Process
VS.
VS.
1 – Select the Price Objective
Primary focus on profit maximization
Primary focus on market share maximization.
Secondary focus on profit maximization
Primary focus on profit maximization
Primary focus on market share maximization (volume)
2 – Determine Demand
Target market is relatively price insensitive. Demand
is inelastic
Target market is relatively price sensitive. Demand is
elastic
Target market is relatively price insensitive. Demand
is inelastic
Target market is highly price sensitive. Demand is
elastic
3 - Estimate costs
Low volume. Materials: mostly leather and rubber
High volume. Materials: mostly leather and rubber
Very low volume (hand made). Materials: mostly
leather
High volume. Materials: mostly synthetic
4 - Analyze competitor prices and offers
Competitors: Armani, Boss, Prada ($279 - $345)
Competitors: Nike, Puma, Reebok ($40 - $59)
Competitors: Manolo Blahnik, Versace, Fendi
($400 - $525)
Competitors: Wal-Mart, Pay Less ($25 - $45)
5 - Select a pricing method
Perceived-value pricing
Going-rate pricing
Perceived-value pricing
Value pricing
6 - Select a final price
Overcharging Strategy
Medium Value Strategy
Premium Strategy
Economy Strategy
Responding to Competitor Price Cuts
Maintain perceived value
Depends on position in
product lifecycle
Maintain perceived value
and status
Discount
Responding to Competitor Price
Increases
Maintain perceived value and
status
Depends on elasticity of
demand
Difficult to increase price during the
season (very short life-cycle). Raise
prices on next collection
Increase profit through higher
volumes
Questions?