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kotler_mm13e_im_14 - CHAPTER ING STRATEGIES AND PROGRAMS 14...

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CING STRATEGIES AND PROGRAMS 14 C H A P T E R LEARNING OBJECTIVES After reading this chapter, students should: Know how consumers process and evaluate prices Know how a company should set prices initially for products or services Know how a company should adapt prices to meet varying circumstances and opportunities Know when a company should initiate a price change Know how a company should respond to a competitor’s price change CHAPTER SUMMARY Despite the increased role of nonprice factors in modern marketing, price remains a critical element of the marketing mix. Price is the only element that produces revenue; the others produce costs. In setting pricing policy, a company follows a six-step procedure. It selects its pricing objective. It estimates the demand curve, the probable quantities it will sell at each possible price. It estimates how its costs vary at different levels of output, at different levels of accumulated production experience, and for differentiated marketing offers. It examines competitors’ costs, prices, and offers. It selects a pricing method. It selects the final price. Companies do not usually set a single price, but rather a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels, and other factors. Several price-adaptation strategies are available: (1) geographical pricing; (2) price discounts and allowances; (3) promotional pricing; and (4) discriminatory pricing. After developing pricing strategies, firms often face situations in which they need to change prices. A price decrease might be brought about by excess plant capacity, declining market share, a desire to dominate the market through lower costs, or economic recession. A price increase might be brought about by cost inflation or overdemand. Companies must carefully manage customer perceptions in raising prices. Companies must anticipate competitor price changes and prepare contingent response. A number of responses are possible in terms of maintaining or changing price or quality. The firm facing a competitor’s price change must try to understand the competitor’s intent and the likely duration of the change. Strategy often depends on whether a firm is producing homogeneous or nonhomogeneous products. Market leaders attacked by 317
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Chapter-by-Chapter Instructional Material lower-priced competitors can seek to better differentiate itself, introduce its own low-cost competitor, or transform itself more completely. DETAILED CHAPTER OUTLINE Price is the one element of the marketing mix that produces revenue; the other elements produce costs. Prices are perhaps the easiest element of the marketing program to adjust; product features, channels, and even promotion take more time. Price also communicates to the market the company’s intended value positioning of its product or brand. A well- designed and marketed product can command a price premium.
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