4-2009-New_VALUE._PRICING.w.answrs

4-2009-New_VALUE._PRICING.w.answrs - Customer ValueBased...

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1 Customer  Value-Based Pricing
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Outline 1. Some brands can charge higher prices a. Reasons why 1. What is customer value-based pricing 1. How to set and implement value-based prices 1. How estimated value evaluation improves prices 2
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1. Specific types of value-based pricing via segment or situation a. customized prices (and “building fences”) b. price Bundling 1. How to communicate value 1. Three Appendices (for reading on your own; not on an exam) a. determinants of price elasticity b. methods to determine demand c. psychological pricing 3
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4 Premium Priced Brands Clorox bleach ---gross margin = 58%                                  vs. 25% for other brands Morton table salt --- 18% higher than Arrow  Heinz ketchup --- 61% higher price than Del Monte Kingston charcoal --- 11% edge over Royal Oak Source:  Winning the Profit Game: Smarter Pricing, Smarter Branding , Docters, et al, 2004.  
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Pricing per Ounce $0.000 $0.020 $0.040 $0.060 $0.080 $0.100 $0.120 $0.140 Tide Surf Arm & Hammer Publix Walmart Target
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6 Toyota s Corrola vs.  GM s Geo Prism Joint venture plant  in California built the Toyota  Corolla and the Chevrolet Prizm side by side Designed and sold virtually the same car Toyota designed both models differences in their components and trim were minor (exact same parts except for some cosmetics) Both vehicles received high marks from  Consumer  Reports , comparably equipped midrange models
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Comparison of Prices for Two  Physically  Identical Cars Toyota Corolla ( $ ) 15223 14973 11417 15315 14315 9955 Mfr's Sugg. Retail Price Net Price Trade-in Value Chevrolet Prism ( $ ) 250 3556 Rebate Depreciatio n Difference /Vehicle     $ 2,800                   $ 3,404 Toyota Corolla ($)        $17,230                        $16,980                         $13,424 Chevrolet Prism ($)                    $15,180       $1,000        $14,180       $4,360         $9,820 $250 $3,556
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Comparison of Prices for Two  Physically  Identical Cars Toyota Corolla ( $ ) 15223 14973 11417 15315 14315 9955 Mfr's Sugg. Retail Price Net Price Trade-in Value Chevrolet Prism ( $ ) 250 3556 Rebate Depreciatio n Difference /Vehicle     $ 2,800                   $ 3,404 Toyota Corolla ($)        $17,230                        $16,980                         $13,424 Chevrolet Prism ($)                    $15,180      $1,000       $14,180       $4,360         $9,820 $250 $3,556
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9 Comparison of Prices for Two  Physically  Identical Cars Toyota Corolla ( $ ) 15223 14973 11417 15315 14315 9955 Mfr's Sugg. Retail Price Net Price Trade-in Value Chevrolet Prism ( $ ) 250 3556 Rebate Depreciatio n Diff./Car             $2,050                         $2,800                        $3,604                        230,000  52,000 Sales in 2000 Toyota Corolla ($)       
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4-2009-New_VALUE._PRICING.w.answrs - Customer ValueBased...

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