Presentation on theme: "MARKETING Pricing Strategies"— Presentation transcript:
1 MARKETING Pricing Strategies Prof. Bauer-Ramazani
2 Overview Definition of price Prices in BU113 companies Factors that influence the pricing decisionPricing objectivesThree major pricing strategies and their advantages and disadvantagesPricing strategies over the product life cyclePricing tactics
3 Price -- Definitionthe amount of money charged for a product or servicethe sum of all the values that consumers exchange for the benefits of having or using the product or serviceExamples of “price?”Tuition, rent, fare, retainer, toll, salary/wage, dues
4 Prices -- BU113 CompaniesWhat objectives did the managers have in mind when they set their prices?
7 Price Strategies for New Products Penetration PricingPRICELow price establish product in the marketSkimming PricingHigh price/Prestige pricing appeal to early adopters; recover high R&D costsPRICESkimming PenetrationPRICELower price over time Move inventory, stimulate D, extend product life
8 Marketing Strategy Over the Product Life Cycle INTRODUCTION GROWTH MATURITY DECLINEMarketing strategy Market development Increase market Defend market Maintain efficiency inemphasis share share exploiting productPromotion Mount sales Appeal to Emphasize Reinforce loyalStrategy promotion for mass market brand differences, customers; reduceproduct awareness benefits & loyalty promotion costsPlace strategy Distribute through Build intensive Enlarge Be selective inselective outlets network of distribution distribution, trimoutlets network unprofitable outletsPricing High price/unique Lower price Price at or below Set price to strategy product / cover over time competition remain profitable production costs or reduce toLow price/gain liquidate market share
10 Elasticity of Demand Inelastic Demand Elastic Demand Price Electricity measure of the sensitivity of demand to changes in pricesInelastic DemandQ2 Q1QuantityP1P2ElectricityPriceElastic DemandQ2QuantityP1P2Fast foodQ1Pricenot price sensitive - no real change in demandprice sensitive - changes in demand
11 Market-based Pricing Pricing Existing Products/Services - 3 options Pricing below market prices price warsEX: airlines, store brand vs. manufacturer’s brandDumpingPricing above prevailing market prices for similar productsEX: Sony higher price = higher quality?Pricing at or near market prices
12 Pricing Tactics Price Lining Psychological Pricing Discounting Price points: Setting a limited number of prices for certain categories of productsPsychological PricingOdd-evenDiscountingQuantity discountsCash discounts (2/10 net 30)Web programs: free!
17 Review 5 Factors that influence prices Pricing objectives Pricing strategies at different stages of the Product Life Cycle (advantages/disadvantages)Methods of Determining PricesElasticity of demandMark-upBreakeven Analysis