Session 15 - Pricing 2

Session 15 - Pricing 2 - Pricing 2 Session 15 Introduction...

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1 Pricing 2 Session 15 Introduction to Marketing Professor Greenleaf Fall 2011
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Session 12 – Pricing 2 2 Article yesterday on Apple’s new, “low” price strategy NYT 10.23.11
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Session 12 – Pricing 2 3 Today’s Agenda Segmented Pricing Sometimes termed price discrimination Psychological issues in pricing
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Session 12 – Pricing 2 4 Segmented Pricing and Price Discrimination Charge different prices to different consumers for what is essentially the same product or service Increases profits compared to charging the same price to all consumers Profit increases because firm takes more consumer surplus the difference between price the consumer paid and the highest price they were willing to pay
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Session 12 – Pricing 2 5 Example of Price Discrimination Hotel rooms Guests in the room next to yours may be paying much more, or much less, than you did What determines the price different consumers pay for the same hotel room? Consumers who are more price- sensitive pay a lower price Consumers who are less price- sensitive pay a higher price
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Session 12 – Pricing 2 6 Three conditions for successful price discrimination 1) Different consumer segments with different price sensitivities 2) Must be able to identify which segment consumers are in, or get them to tell you indirectly (called self-selection ) 3) Must prevent resale between segments Otherwise low-price segment can make money by reselling to high-price segment Successful price discrimination strategy must make sure all three conditions hold
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Session 12 – Pricing 2 7 Coupons - Another example of price discrimination 75 cent coupon for Tylenol 1) Different price sensitivities 2) Consumers self-select by clipping or downloading coupon Only price sensitive consumers will clip Could also direct to particular blocks or ZIP code
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Session 15 - Pricing 2 - Pricing 2 Session 15 Introduction...

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