Chapter 9 Notes

Chapter 9 Notes - Chapter 9 Pricing (pg 261-291) INTRO -...

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Chapter 9 – Pricing (pg 261-291) INTRO - Toys “R” Us getting owned by Wal-mart during the Hokey Pokey Elmo sale. - “It’s not just about selling, it’s about selling profitably - cutting price is often NOT the best answer - lost profits - signal customers that price is more important than customer/brand value - answer: “give people something of value and they will happily pay for it” WHAT IS PRICE? - Price is the amount of money charged for a product or service. - sum of all values that customers give up in order to gain the benefits of having a product/service - major influence in buyer choice, market share and profitability - only revenue element (all other represent cost ) - flexible, can be changed quickly; but greatly affects bottom-line - common mistake: go on sale too soon rather than conveying value to customer - too cost oriented (rather than customer-value oriented) PRICING FACTORS - too high - no demand, too low - no profit --------------------------------------------------- I. Customer perception of value ceiling III. Other internal/external considerations: marketing mix/demand/competitors II. Product cost floor --------------------------------------------------- I. Customer perception of value Value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. - set before the marketing program is set - customers value price cost product (cost-based is exact opposite order) - “good value” is NOT the same as “low price” - hard to assign value to abstract satisfactions (taste/relaxation/etc) market test 1) Good-value pricing : offering just the right combo of quality and good service at a fair price - less-expensive versions of established brands (McDonald/Armani Exchange) - EDLP (everyday low pricing) vs. high-low pricing (frequent promotions on higher daily price) - EDLP wins but requires everyday low cost 2) Value-added pricing : attach feature instead of cutting price
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Chapter 9 Notes - Chapter 9 Pricing (pg 261-291) INTRO -...

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