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Unformatted text preview: 3-33-5Chapter 17Price– what a customer must give up to get the benefits offered by the rest of a firm’s marketing mix (plays a role in helping a customer determine value in a product)Pricing levels- affects number of sales a firm makes and how much it earnsStrategy Planning and Pricing Objectives and Policies (Exhibit 17-1)Price Has Many Strategic DimensionsKey Pricing Policies•Price Flexibility•Price Levels Over Product Life Cycle•Discounts & Allowances – to whom and when•Transportation costs – who pays and howArticle: Apple Cuts iPhone Price Ahead of Holidays•Unexpectedly cut the price of its phone claiming that it was seeking to broaden the market for holiday season•iPhone by $200 to $399•plans to release new line of iPhones•price cuts were planned a long time ago (strategy)Article: Airlines Increase Prices to Compensate for Rising Costs•for extra bags, overweight bags, and oversized bags•doing this to look for ways to boost profitabilityodue to increased fuel pricesounited expected to generate $100mn in cost savings revenue after raising costs of checking a second and third bag; savings come from burning less fuel because of reduced with in cargo holdStrategy Planning for Price (17-1)4 Variables of ?????1.How flexible the price will be2.At what level the product will be over the product life cycle3.to whom and when discount allowances will be given4.buy their fuel years in advance1990 – Sears went back to value-based pricing (“Come See the Softer Side of Sears”)•Changing pricing policies and strategies really hurt SearsArticle: More Shoppers Head to Discount Stores•As economy slows, many avoid higher-end retailers•Trend became apparent during the holiday season (wal-mart did better than full price stores)•January’s retail sales were the worst since 1970•Full price retailers experiencing sales drops 8% per month•Stagnant economy, increased gas prices, and mortgage rates caused individuals and families to pay attention to spending•Shopper categories1.those who want to bargain2.those who need to bargainVideo: gym equipment - Cybex•goes into hotel/motels•Thinking inside the boxoFocused on this as a company•Want to be a premium supplier•Equipment is expensive•Look for profitability on the product (also marketing costs)•How do you absorb warranty costs?? What’s the cost to package and ship? •All costs can vary (not necessarily fixed costs)•Run the risk of dealers going to other productsThe Price Equation: Price Equals Something of Value (Exhibit 17-2) – SEE BOOK•Price•EqualsoEquals•Something of ValuePrice as Seen by Channel Members (17-3) SEE BOOK3-73/7/08One price policy-the same for everyone-frequently purchased items-convenient-low cost-maintains goodwillFlexible price policy-different customers, different prices-databases make it easier-sales people can adjust prices-too much cutting can hurt profitsSkimming price-initial skimming: firm tries to sell at a high price before aiming at more price sensitive consumers-problem with people who can’t afford (medical/life death situations)...
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This note was uploaded on 06/06/2008 for the course MKT 320 taught by Professor Miller during the Spring '08 term at University of Texas at Austin.
- Spring '08