Matakuliah : J0114/Manajemen Pemasaran
Tahun
: 2008
Pricing Strategy
Pertemuan 18
Learning Outcomes
•Students can give their arguments over pricing
methods according to value and corporate goals.
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Material Outline:
• Pricing policy
• Pricing methods
• Pricing over the PLC
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Pricing Policy
• Creating and managing pricing policies strategically:
– Price banding: is a statistical technique for identifying which
customers are paying significantly more or less than the band of
“fair” prices
– There are five steps in the price banding process:
• Identify and get sales reps to agree on the legitimate factors
(service levels, size of orders, geographic region, customer’s
business type) that they believe justify price variations across
accounts based on value.
• Execute a statistical regression of price levels or discount
percentages
• Use the regression equation to estimate the price or discount that
this customer would have gotten
• Plot the actual prices customers pay and compare them to the fair
prices or fair discounts along the regression line
• Brainstorm possible causes of the random variation
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Pricing Policy
• Policy development:
– The key is to treat each request for a price exception as a
request to create or change a policy.
– Specifying what pricing is acceptable under what circumstances
for customers meeting which criteria.
– The goal of good policy is to specify the circumstances and
criteria in a way that maximizes the benefits marketers gain.
– Policies to manage price expectations:
• Promotional pricing: is effective to the extent that it induces a new
product trial, desirable behaviors.
• Negotiated pricing
• Quantity discounting
• Bid-loyalty pricing
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Pricing Policy
• Implementing policies:
– Challenge: sales reps and customers will not accept the change
in price.
• Management responsibility:
– The existence and rationale for policies must be appropriately
positioned with customers.
• Sales force buy-in:
– Before policies are in place, it needs to measure and reward
salespeople for driving profitability, not just revenue.
• Prioritize and sequence challenges:
– Pricing policies also can empower sales reps to offer greater discounts.
– Good policies can generate more business from customers who were
disadvantaged
• Monitor and measure results:
– The value in pricing is lied on the power a policy gives to test, evaluate
and improve pricing strategy over time
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Pricing Methods
• Cost-plus pricing:
– Pricing every product or service to yield a fair return over all
costs fully and fairly allocated.
– Problem: in most industries, it is impossible to determine a
product’s unit cost before determining its price.
• Customer driven pricing:
– Pricing every product according to customer’s willingness to pay.
– Problems:
• Buyers are rarely honest about how much they are actually willing to
pay for a product.
• Sales reps has to raise customer’s willingness to a level that better
reflects the product’s true value.
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Pricing Methods
• Competition-driven pricing:
– Pricing is dictated by competitive conditions. In this view, pricing
is a tool to achieve sales objectives.
– Prices should be lowered only when they are no longer justified
by the value offered in comparison to the value offered by the
competition.
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Pricing over PLC
• New products :
– When The Apple iPod first hit store shelves in 2002, it
transformed the way that consumers purchase, stored and
consumed music.
– Not all new products start a new life cycle.
– When a new product provides a completely new benefit, it may
not be an innovation from the standpoint of buyers.
– New products represent a primary source of organic volume and
profit growth and avoiding pricing mistakes can have both short
and long term impact
– A new product launch creates an excellent opportunity to
reengage with customers to change what and how they
purchase.
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Pricing over PLC
• Pricing innovation for market introduction:
• An innovation is a product so new and unique that
buyers find the concept somewhat foreign.
• Recognition of the diffusion process is extremely
important in formulating pricing strategy for two reasons:
– The long-run demand for an innovative product depends on the
number of initial buyers.
– Value communications and effective promotional programs can
influence which attributes drive purchase decisions and how
these attributes valued.
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Pricing over PLC
• Pricing new products for growth:
• Repeat purchasers are no longer uncertain
• Firm focuses its marketing efforts on developing unique
attributes for its products
• As competition becomes more intense, the uniqueness
of its product creates a value effect that attenuates
buyer’s price sensitivity.
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Pricing over PLC
• Pricing during maturity:
• Buyers evaluate and compare competing products, thus
reducing brand loyalty
• Many product imitation that can reduce product
differentiation
• Buyers increase their price sensitivity and lower risk
• Strategies:
–
–
–
–
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Unbundling related products and services
Improve estimation of price sensitivity
Expansion on the product line
Improve control and utilization of costs
Pricing over PLC
• Pricing strategy in market decline:
• Retrenchment:
– Liquidation of those assets and withdrawal from those markets
that represent the weakest links in the firm’s competitive position
• Harvesting:
– Is a phased withdrawal from an industry. The harvesting firm
does not price to defend its remaining market share but rather to
maximize its income.
• Consolidation:
– Is an attempt to gain a stronger position in a declining industry.
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Conclusions:
• Price banding: is a statistical technique for identifying
which customers are paying significantly more or less
than the band of “fair” prices
• The goal of good policy is to specify the circumstances
and criteria in a way that maximizes the benefits
marketers gain.
• Pricing can be set by: cost plus, customer driven, and
competition driven pricing strategy.
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