Principles of Marketing
advertisement
Principles of Marketing Lecture-27 Summary of Lecture-26 Price - Quality Strategies Price Higher Quality Higher Lower Lower Premium Strategy Good-Value Strategy Overcharging Strategy Economy Strategy Price-Adjustment Strategies Discount and Allowance Pricing Segmented Pricing Psychological Promotional Pricing Geographical International Pricing Pricing Pricing Today’s Topics Initiating and Responding to Price Changes Competitor Reactions To Price Changes Initiating Price Cuts Price Changes Buyer Reactions to Price Changes Initiating Price Increases Price Changes Initiating Price Cuts is Desirable When a Firm: –Has excess capacity –Faces falling market share due to price competition –Desires to be a market share leader Price Increases are Desirable: –If a firm can increase profit, faces cost inflation, or faces greater demand than can be supplied. Alternatives to Increasing Price –Reducing product size, using less expensive materials, unbundling the product. Buyer reactions to price changes must be considered. Competitors are more likely to react to price changes under certain conditions. –Product is uniform –Buyers are well informed Responding to price changes Has Competitor Cut Price? Will Lower Price Negatively Affect Our Market Share & Profits? Can/ Should Effective Action be Taken? No Hold Current Price; Continue to Monitor Competitor’s Price. No Reduce Price No Yes Raise Perceived Quality Improve Quality & Increase Price Launch Low-Price “Fighting Brand” Respond To Price Changes Only If… –Market share / profits will be negatively affected if nothing is changed. Four strategies Reduce price Raise perceived quality Improve quality and increase price Launch a low price fighting brand End of Price part….. Review nd 2 P (Price) What is Price? Price Has Many Names Rent Fee Rate Tuition Fare Toll Bribe Salary Wage Interest CommissionPremium Tax Definition Price –The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Factors Affecting Price Decisions Internal Factors Positioning Objectives Pricing Decisions External Factors Target Market Internal Factors Affecting Pricing Decisions Marketing Objectives Marketing-Mix Strategy Costs Organizational Considerations External factors affecting Pricing decisions Market and Demand Competitors’ Costs, Prices, and Offers Other External Factors Economic Conditions Reseller Needs Government Actions Social Concerns Price Elasticity of Demand How quantity demanded responds to price changes Price A. Inelastic Demand Demand Hardly Changes With a Small Change in Price. P2 P1 Price Q2 Q1 Quantity Demanded per Period B. Elastic Demand Demand Changes Greatly With a Small Change in Price. P’2 P’1 Q2 Quantity Demanded per Period Q1 General Pricing Approaches Cost-based Pricing Value-based Pricing Competition-based Pricing Break-even…for Determining Target Return Price and Breakeven Volume 1000 Total cost Rupees (in thousands) 1200 Total revenue Target profit 800 Break-even point 600 400 Fixed cost 200 0 10 20 30 40 50 Sales volume in units (thousands) New Product Pricing Strategies •Market Skimming •Market Penetration Product Mix Pricing Strategies Product Line Pricing Optional-Product Pricing Product Mix Pricing Strategies Captive-Product Pricing By-Product Pricing Product-Bundle Pricing Price - Quality Strategies Price Higher Quality Higher Lower Lower Premium Strategy Good-Value Strategy Overcharging Strategy Economy Strategy Price-Adjustment Strategies Discount and Allowance Pricing Segmented Pricing Psychological Promotional Pricing Geographical International Pricing Pricing Pricing Competitor Reactions To Price Changes Initiating Price Cuts Price Changes Buyer Reactions to Price Changes Initiating Price Increases Responding to price changes Has Competitor Cut Price? Will Lower Price Negatively Affect Our Market Share & Profits? Can/ Should Effective Action be Taken? No Hold Current Price; Continue to Monitor Competitor’s Price. No Reduce Price No Yes Raise Perceived Quality Improve Quality & Increase Price Launch Low-Price “Fighting Brand” Enough for Pricing. . . Summary Next…. Principles of Marketing Lecture-27
