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Market-Based Pricing and Pricing Strategies Chapter Eight M arket-Based Management, 4 th edition.

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Presentation on theme: "Market-Based Pricing and Pricing Strategies Chapter Eight M arket-Based Management, 4 th edition."— Presentation transcript:

1 Market-Based Pricing and Pricing Strategies Chapter Eight M arket-Based Management, 4 th edition

2 8-2 Market-Based Pricing and Pricing Strategies Chapter Eight Market-Based Pricing Vs. Cost-Based Pricing Pricing Strategies and the Product Life Cycle Pricing Metrics Price Elasticity Cross Price Elasticity

3 8-3 Market-Based Pricing What is Market-Based Pricing? What is necessary for firms to engage in Market-Based Pricing? –Competitor Intelligence –Customer Intelligence

4 8-4 Market-Based Pricing Strategies 1.Skim Pricing 2.Value In-Use Pricing 3.Perceived Value Pricing 4.Segment Pricing 5.Strategic Account Pricing 6.Plus-One Pricing At what stages in the product life cycle (PLC) should these strategies be employed?

5 8-5 Strategic Acct. Pricing Value-In-Use Pricing Product Life Cycle Pricing Strategies Market Demand Time Skim Pricing Perceived Value Pricing Segment Pricing Plus-One Pricing

6 8-6 Cost-Based Pricing What is Cost-Based Pricing?

7 8-7 Cost-Based Pricing Strategies 1.Floor Pricing 2.Cost-Plus Pricing 3.Penetration Pricing 4.Low-Cost Leader Pricing 5.Competitive Bid Pricing 6.Harvest Pricing At what stages in the PLC should these strategies be employed?

8 8-8 Harvest Pricing Cost-Plus Pricing Product Life-Cycle Pricing Strategies Market Demand Time Floor Pricing Penetration Pricing Low-Cost Producer Pricing Competitive Bid Pricing

9 8-9 Pricing Orientation and Pricing Strategies

10 8-10 Pricing Metrics Total Contribution –Total Contribution = Volume (units) X Margin (per unit) Price and Break-Even Volume –Break-Even Volume = Fixed Expenses/Margin per Unit Price and Break-Even Market Share –Break-Even Market Share = Break-Even Volume/Market Demand

11 8-11 Forces that Shape Price Elasticity Ease of Customer Switching –Product Differentiation –Cost of Switching Suppliers –Customer Loyalty –Ease of Switching Index Supply/Demand Conditions –Supply Conditions –Demand Conditions –Substitutes –Supply/Demand Index

12 8-12 Price Elasticity and Performance

13 8-13 Guidelines for Estimating Price Elasticity

14 8-14 Takeaways / Review Pricing Metrics Price Elasticity –Forces, Estimation, and Performance Importance of Market- Based Pricing Market-Based Pricing Strategies Cost-Based Pricing Strategies Product Life Cycle and Pricing Strategies

15 8-15 Marketing Performance Tools Sales and Profit Impact of Price Elasticity and Price Change

16 8-16 Marketing Performance Tools Sales and Profit Impact of Price Change with Product Substitutes

17 8-17 Marketing Performance Tools Sales and Profit Impact of Price Change with Product Substitutes

18 8-18 Marketing Performance Tools Sales and Profit Impact of Price Change with Complimentary Products

19 8-19 Marketing Performance Tools Sales and Profit Impact of Price Change with Complimentary Products


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