Hold Current Price - THE CLASS COFFEE
MKTG131 – Marketing Management
PRICING STRATEGY (TOPIC 4 -
HIGHLIGHTS)
PRICING: WHAT TO CONSIDER?
PRICING: WHAT BUYERS DO?
Buyers get instant price comparison from thousands of vendors;
Buyers name their price and have it met;
Buyers sometimes demand to get “free” products in exchange of a “price”.
POSSIBLE CONSUMER REFERENCE PRICES
Fair price
Typical price
Last price paid
Upper-bound and lower-bound price
Historical competitor prices
Expected future price
Usual discounted price
NEW PRICING STRATEGIES
Market Skimming
- setting a high price for a new product to maximize revenues from the target market.
- results in fewer, more profitable sales.
Market Penetration
- setting a low price for a new product in order to attract a large number of buyers.
- results in a larger market share.
COMMON PRICING MISTAKES
Failure to revise price to capitalize on market changes
Setting price independently of the rest of the marketing mix
Failure to vary price by product item, market segment, distribution channels, and purchase occasion
FACTORS LEADING TO LESS PRICE SENSITIVITY
The product is more distinctive
Buyers are less aware of substitutes
Buyers cannot easily compare the quality of substitutes
The expenditure is a smaller part of the buyer’s total income
The expenditure is small compared to the total cost of the end product
Part of the cost is borne by another party
The product is used in conjunction with assets previously bought
The product is assumed to have more quality, prestige, or exclusiveness
Buyers cannot store the product
PRICE-ADJUSTMENT STRATEGIES
Discount & Allowance
- reducing prices to reward customer responses such as paying early or promoting the product.
Segmented
- adjusting prices to allow for differences in customers, products, or locations.
Psychological Pricing (price being used as quality indicator)
Promotional Pricing (temporarily reducing prices to increase short-run sales)
Geographical Pricing
International Pricing
PRICE-ADJUSTMENT STRATEGIES
Has Competitor Cut
Price?
No
Hold Current Price;
Continue to Monitor
Competitor’s Price.
Will Lower Price
Negatively Affect Our
Market Share & Profits?
No
Can/ Should Effective
Action be Taken?
No
Yes
Reduce Price
Raise Perceived
Quality
Improve Quality
& Increase Price
END OF PRESENTATION
Reminders: Reporters for “Distribution
Strategy” topics, please prepare for your report next meeting.
Homework: Answer the following question:
Is the right price a fair price?
(Write your answer in ¼ sheet of paper. Short discussion only.)
