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The Marketing Mix Price Strategies. The Importance of Pricing Pricing is one of the most vital decisions made by management Price too high and you lose.

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Presentation on theme: "The Marketing Mix Price Strategies. The Importance of Pricing Pricing is one of the most vital decisions made by management Price too high and you lose."— Presentation transcript:

1 The Marketing Mix Price Strategies

2 The Importance of Pricing Pricing is one of the most vital decisions made by management Price too high and you lose the sale Price too low and you cant make money Two fundamental ways to grow revenue raise your price increase the quantity you sell Price is the easiest of all marketing variables to influence but among the most complex decisions to make price changes may be implemented immediately

3 Conceptual Orientation to Pricing Initial pricing discretion Corporate objectives and regulatory constraints Competitive factors Final pricing discretion (Price ceiling) Demand factors(Value to buyers) (Price floor) Direct variable costs Nagle 1999

4 Nine Price-Quality Strategies

5 Setting the Price

6 Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Survival Maximize current profits Maximize market share Penetration strategy Market skimming Skimming strategy Product quality leaders Partial cost recovery

7 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Understand factors that affect price sensitivity Estimate demand curves Understand price elasticity of demand Elasticity Inelasticty

8 Price Sensitivity Situations That Increase Price Sensitivity Availability of product substitutes Higher total expenditure Noticeable differences Easy price comparison Situations That Decrease Price Sensitivity Real or perceived necessities Lack of product substitutes Complementary products Product differentiation Perceived product benefits Situational influences

9 Price Elasticity of Demand

10 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Types of costs and levels of production must be considered Accumulated production leads to cost reduction via the experience curve Differentiated marketing offers create different cost levels

11 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Select method: Markup pricing Target-return pricing Perceived-value pricing Value pricing EDLP, Hi-Lo Going-rate pricing Auction-type pricing Group pricing

12 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Requires consideration of additional factors: Psychological pricing Gain-and-risk-sharing pricing Influence of other marketing mix variables Company pricing policies Impact of price on other parties

13 Trade-in Allowances Promotional Allowances Adapting the Price Price Discounts and Allowances Quantity Discounts Seasonal Discounts Cash Discounts Functional Discounts

14 Adapting the Price Longer Payment Terms Loss-Leader Pricing Low Interest Financing Warranties and Service Contracts Psychological Discounting Cash Rebates Special Event Pricing Promotional Pricing Tactics

15 Adapting the Price Discriminatory Pricing Tactics Customer Segment Pricing Product-Form Pricing Location Pricing Channel Pricing Image Pricing Time Pricing

16 Adapting the Price Price discrimination works when: Market segments show different intensities of demand Consumers in lower-price segments can not resell to higher-price segments Competitors can not undersell the firm in higher- price segments Cost of segmenting and policing the market does not exceed extra revenue

17 Adapting the Price Product-Mix Pricing Tactics Optional-Feature Pricing Captive-Product Pricing Product-Bundle Pricing Product-Line Pricing By-Product Pricing Two-Part Pricing

18 Legal and Ethical Issues in Pricing Price Discrimination Price Fixing Predatory Pricing Deceptive Pricing


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