kotler12_exs - Pricing Strategies Pricing Cha pte r 12...

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Unformatted text preview: Pricing Strategies Pricing Cha pte r 12 Objectives • Le a rn the ma jor s tra te gie s for Le pricing imita tive a nd ne w products . p ricing • Unde rs ta nd how compa nie s find a Unde s e t of price s tha t ma ximize s the profits from the tota l product mix. p rofits Objectives • Le a rn how compa nie s a djus t Le the ir price s to ta ke into a ccount d iffe re nt type s of cus tome rs a nd s itua tions . • Know the ke y is s ue s re la te d to Know initia ting a nd re s ponding to price cha nge s . c ha Case Study mLife : AT&T Wire le s s m Life • P ric e is #1 fac to r • m Life ad c ampaig n Pric mLife influe nc ing c ho ic e a tte mpte d to build o f c e llular the AT&T wire le s s c o mpanie s b rand s o c o ns ume rs w o uld c o ns ide r • P ric e s in wire le s s Pric v alue rathe r than indus try dro ppe d jus t pric e jus 25% in thre e ye ars 2 5% • Campaig n me t with Campaig • Fe w c o mpanie s Fe s tro ng initial we re pro fitable we Definitions • Ma rke t-S kimming P ricing S e tting a high price for a ne w product to s kim ma ximum re ve nue s la ye r by la ye r from s e gme nts willing to pa y the high price . p rice • Ma rke t-P e ne tra tion P ricing S e tting a low price for a ne w product in o rde r to a ttra ct a la rge numbe r of buye rs a nd a la rge ma rke t s ha re . Product Mix Pricing Strategies • P roduct Line P ricing S e tting price s te ps be twe e n product line ite ms . ite Price points P rice • Optiona l-P roduct P ricing P ricing optiona l or a cce s s ory products s old with the ma in product Product Mix Pricing Strategies • Ca ptive -P roduct P ricing P ricing products tha t mus t be us e d with the ma in product with High m argins are ofte n s e t for s upplie s High S e rvice s : two-pa rt pricing s tra te gy Fixe d fe e plus a variable us age rate Fixe Product Mix Pricing Strategies • By-P roduct P ricing P ricing low-va lue by-products to ge t rid of the m rid • P roduct Bundle P ricing P ricing bundle s of products s old toge the r toge Price Adjustment Strategies S trate g ie s • • • • • • Dis count / allowance Dis S e gm e nte d Ps ychological Prom otional Ge ographical Inte rnational • Type s of dis counts Ca s h dis count Qua ntity dis count Functiona l (tra de ) dis count S e a s ona l dis count • Allowa nce s Tra de -in a llowa nce s P romotiona l a llowa nce s Price Adjustment Strategies S trate g ie s • • • • • • Dis count / allowance S e gm e nte d Ps ychological Prom otional Ge ographical Inte rnational • Type s of s e gme nte d Type pricing s tra te gie s : p ricing Cus tome r-s e gme nt P roduct-form pricing Loca tion pricing Time pricing • Als o ca lle d re ve nue or Als yie ld ma na ge me nt yie • C e rta in conditions mus t Ce e xis t for s e gme nte d pricing to be e ffe ctive p ricing Price Adjustment Strategies Co nditio ns Ne c e s s ary fo r S e g me nte d Pric ing Effe c tive ne s s • Ma rke t is s e gme nta ble • Lowe r price d Lowe s e gme nts a re not a ble to re s e ll to • C ompe titors ca n not Compe u nde rs e ll s e gme nts cha rging highe r price s c ha • P ricing mus t be le ga l • C os ts of s e gme nta tion ca n Cos not e xce e d re ve nue s e a rne d n ot • S e gme nte d pricing mus t re fle ct re a l diffe re nce s in cus tome rs ’ pe rce ive d va lue c us Price Adjustment Strategies S trate g ie s • • • • • • Dis count / allowance S e gm e nte d Ps ychological Prom otional Ge ographical Inte rnational • The price is us e d to s a y The s ome thing a bout the product. p roduct. P rice -qua lity re la tions hip Re fe re nce price s Diffe re nce s a s s ma ll a s Diffe five ce nts ca n be importa nt importa Nume ric digits ma y ha ve Nume s ymbolic a nd vis ua l q ua litie s tha t p s ychologica lly influe nce the buye r the Price Adjustment Strategies S trate g ie s • • • • • • Dis count / allowance S e gm e nte d Ps ychological Prom otional Ge ographical Inte rnational • Te mpora rily pricing Te p roducts be low the lis t price or e ve n be low cos t p rice • Los s le a de rs S pe cia l-e ve nt pricing Ca s h re ba te s Low-inte re s t fina ncing, Low-inte longe r wa rra ntie s , fre e ma inte na nce ma • P romotiona l pricing ca n ha ve a dve rs e e ffe cts ha Price Adjustment Strategies Pro mo tio nal Pric ing Pro ble ms P ro • E a s ily copie d by Ea compe titors c ompe • C re a te s de a l-prone Cre cons ume rs c ons • Ma y e rode bra nd’s Ma va lue va • Not a le gitima te s ubs titute Not for e ffe ctive s tra te gic pla nning p la • F re que nt us e le a ds to Fre indus try price wa rs which be ne fit fe w firms be Price Adjustment Strategies S trate g ie s • • • • • • Dis count / allowance S e gm e nte d Ps ychological Prom otional Ge ographical Inte rnational • Type s of ge ogra phic Type pricing s tra te gie s : p ricing FOB-origin pricing Uniform-de live re d Uniform-de pricing p ricing Zone pricing Ba s ing-point pricing F re ight-a bs orption Fre pricing p ricing Price Adjustment Strategies S trate g ie s • • • • • • Dis count / allowance S e gm e nte d Ps ychological Prom otional Ge ographical Inte rnational • P rice s cha rge d in a s pe cific country de pe nd on ma ny fa ctors on Economic conditions Compe titive s itua tion La ws / re gula tions Dis tribution s ys te m Cons ume r pe rce ptions Cos t cons ide ra tions Price Changes • Initia ting P rice Cuts is De s ira ble Initia Whe n a Firm: Whe Ha s e xce s s ca pa city F a ce s fa lling ma rke t s ha re due to Fa price compe tition p rice De s ire s to be a ma rke t s ha re le a de r Price Changes • P rice Incre a s e s a re De s ira ble : If a firm ca n incre a s e profit, fa ce s cos t If infla tion, or fa ce s gre a te r de ma nd tha n ca n be s upplie d. ca • Me thods of Incre a s ing P rice • Alte rna tive s to Incre a s ing P rice R e ducing product s ize , us ing le s s Re e xpe ns ive ma te ria ls , unbundling the product. p roduct. Price Changes • Buye r re a ctions to price cha nge s mus t Buye be cons ide re d. be • C ompe titors a re more like ly to re a ct to Compe p rice cha nge s unde r ce rta in conditions . c onditions Numbe r of firms is s ma ll P roduct is uniform Buye rs a re we ll informe d Price Changes • R e s pond To P rice Cha nge s Only If: Re Ma rke t s ha re / profits will be ne ga tive ly Ma a ffe cte d if nothing is cha nge d. Effe ctive a ction ca n be ta ke n: R e ducing price R ais ing pe rce ive d quality Im proving quality and incre as ing price Im Launching low-price “ fighting brand” Launching Public Policy and Pricing • P ricing within C ha nne l Le ve ls w ithin P rice -fixing C om pe titors can not work with e ach othe r to s e t price s P re da tory pricing Firm s m ay not s e ll be low cos t with the inte ntion of punis hing a com pe titor or gaining h ighe r long-run profits or running a com pe titor out of bus ine s s . o ut Public Policy and Pricing • P ricing acros s C ha nne l Le ve ls a cros P rice dis crimina tion Re ta il price ma inte na nce De ce ptive pricing Bogus re fe re nce / com paris on pricing B ogus S canne r fraud Price confus ion P rice ...
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