Download presentation

Presentation is loading. Please wait.

Published byAlfred Hope Modified over 2 years ago

1
INTRODUCTORY MARKETING Pricing M. Louise Ripley, MBA, PhD

2
PRICING LECTURE Questions We Will Answer u How is pricing part of Marketing Strategy? u How is pricing affected by Cost, Demand, Competition? u How do you set a price?

3
KEY FACTORS IN PRICING u Objectives u Strategies u Policies and Constraints u Tactics

4
PRICING OBJECTIVES u Cost u Demand u Competition

5
PRICING OBJECTIVES COST ORIENTED u Emphasis - Cost/Profit l Target Return l Satisfactory Return l Maximize Current Profit l Maximize Long Term Profit

6
COST CALCULATION: How real is this price? uEstimate demand function Q = P uEstimate cost function C = Q uCalculate total revenues R = P(1000-4P) uCalculate Profits l Z = (1000P - 4P 2 ) - ( Q) l Z = -56, ,000P - 4P 2 = $150

7
PRICING OBJECTIVES DEMAND ORIENTED u Emphasis - Demand/Sales u Growth in Market Share u Growth in Dollar or Unit Sales

8
PRICING OBJECTIVES DEMAND ORIENTED u How to Grow in Sales

9
Skimming the Cream u Conditions: m Demand Not Sensitive to Price m Different Price Segments m Consumers Unaware of Cost m Little Competition

10
Skimming the Cream - High Price u MAYORS FOUNTAIN PEN $500? Their Advertising Claim: For the average lifestyle, the average writing instrument is perfectly adequate. But while most pens are designed for signing postcards, ours are designed for signing peace treaties.

11
Skimming the Cream continuing the strategy... u High Price First u Lower Price Later l Dupont: Cellophane, Nylon l Polaroid: Camera

12
PRICING OBJECTIVES DEMAND ORIENTED u How to Grow in Sales l Skimming the Cream l Penetration Pricing

13
PRICING OBJECTIVES DEMAND ORIENTED u Penetration Pricing - Low Price u Conditions: m Demand is Price Sensitive m No Different Price Segments m Product Not A Status Item m Competition Likely

14
Penetration Pricing u Regular Penetration Pricing The Colt Car Sells at regular low price

15
Penetration Pricing Special Condition Nabiscos New Giggles Cookies 20 cents off coupon for a short time only

16
PRICING OBJECTIVES COMPETITION ORIENTED u Emphasis - Competition/Status Quo l Meeting the Competition l Non-Price Competition

17
BREAK EVEN ANALYSIS BEP = $30,000/($1.20-$0.80) = 75,000 units $Sells at $1.20 VC = $0.80 FC = $30,000 Units Break Even Point = 75,000 units

18
PRICING STRATEGIES u Mixing Price with the Other Variables uLiterally Thousands of Combinations

19
Marketing Mix Combinations Just One: Price and Quality P High MediumLow Q HighP remium Penetration Big Bargain Medium Overpriced AverageBargain Low Hit & Run ShoddyCheap

20
PRICING STRATEGIES u Cost u Demand u Competition

21
PRICING STRATEGIES COST ORIENTED u Target Profit Pricing uMark-Up Pricing

22
PRICING STRATEGIES COST ORIENTED u Problems l Difficulties Determining Cost

23
Mark- Up Pricing Problems: What is Mark-up? 13%? 53%?

24
PRICING STRATEGIES COST ORIENTED u Problems l Difficulties Determining Cost l Legal Problems

25
PRICE FIXING

26
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value

27
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential

28
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form

29
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form

30
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form l Product Form

31
LEGAL PRODUCT FORM PRICE DISCRIMINATION u TV without stereo sells for $250 u TV with $5 worth of stereo parts sells for $350

32
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form l Product Form l Place

33
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form l Product Form l Place

34
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form l Product Form l Place l Time

35
PRICING STRATEGIES DEMAND ORIENTED u Perceived Value u Demand Differential l Customer Form l Product Form l Place l Time

36
PRICING STRATEGIES COMPETITION ORIENTED u Going Rate uSealed Bid

37
PRICING OBJECTIVES and STRATEGIES u Cost u Demand u Competition

38
PRICING POLICIES AND CONSTRAINTS u Management u Distributors u Competitors u Suppliers u Company Executives u Stockholders u Government regulations

39
PRICING TACTICS u Psychological Pricing m Odd - Even: $69.95 m Price Lining

40
PRICE LINING MENS SUITS u as seen by the wearer of a $500 suit: cheapGOODoverpriced $300 $500 $700 u as seen after a 10% price increase: cheapGOODoverpriced $330 $550 $770

41
PRICING TACTICS u Psychological Pricing l Odd - Even Pricing l Price Lining l Prestige Pricing

42
PRESTIGE PRICING BAYER

43
PRICING TACTICS u Psychological Pricing l Odd - Even Pricing l Price Lining l Prestige Pricing l Promotional Pricing

44
ILLEGAL PROMOTIONAL PRICING Original Price$250 Illegal Pricing: Was $350 Now Only $300!!

45
PRICING TACTICS u Discount Pricing l Quantity l Cash l Trade/Functional l Seasonal l Consumer - everything else?

46
KEY FACTORS IN PRICING u Objectives l Cost, Demand, Competition u Strategies l Cost, Demand, Competition u Policies and Constraints u Tactics

47
PRICING LECTURE SUMMARY u How is pricing part of Marketing Strategy? u How is pricing affected by Cost, Demand, Competition? u How do you set a price? u Real World Story - Earmuffs tape

Similar presentations

© 2016 SlidePlayer.com Inc.

All rights reserved.

Ads by Google