Pricing strategy Pertemuan 20 Buku 1 Hal: 347-369 Matakuliah : J0504 - Strategi Pemasaran Tahun : 2009 Pricing strategy Pertemuan 20 Buku 1 Hal: 347-369

Learning Objective Strategic Role of Price Analyzing the Pricing Situation Selecting the Pricing Strategy Determining Specific Prices and Policies Bina Nusantara

Cost Analysis for Pricing Decisions Determine the components of the cost of the product. Estimate how cost varies with the volume of sales. Analyze the cost competitive advantage of the product. Decide how experience in producing the product affects costs. Estimate how much control management has over costs.

Range of feasible prices Determining Feasible Prices Price too high; little or no demand Price Floor Price Ceiling Nature of demand in target market Business and marketing strategy Product differentiation Competitors’ prices Prices of substitutes Product costs Range of feasible prices Price too low; no profit possible

SELECTING THE PRICING STRATEGY How much flexibility exists? How to position price relative to costs? How visible to make the price of the product?

Determinants of Pricing Flexibility Demand Costs Demand-Cost Gap Competition Pricing Objectives

Skim strategy Neutral strategy (same as competition) Penetration strategy Above Competition Below Competition

Competitive Pricing Issues Diplomacy rather than force Competitive Pricing Issues Target segments instead of volume Select competitive confrontations Signaling

Illustrative Price Strategies Active strategy Low- active strategy High- active strategy Low relative price High relative price Low- passive strategy High- passive strategy Passive strategy

DETERMINING SPECIFIC PRICES AND POLICIES Selecting Specific Prices Policies to Manage Pricing Strategy Special Pricing Issues

Basis of Determining Specific Prices Demand Cost Competition Demand

Establishing Pricing Policy and Structure Discounts, allowances, returns, and other operating guidelines Pricing Structure Product mix and line pricing relationships How individual items in the line are priced in relation to one another

Managing Pricing Strategy The more that the competitors and customers know about your pricing, the better off you are. In an information age, it is necessary to be transparent about prices and the value of a firm’s offerings. In highly competitive markets, the focus should be on those market segments that provide opportunities to gain competitive advantage. Such a focus leads to a value-oriented pricing approach. Pricing decisions should be made within the context of an overall marketing strategy that is embedded within a business or corporate strategy. Successful pricing decisions are profit oriented, not sales volume or market share oriented.

Managing Pricing Strategy Prices should be set according to customers’ perceptions of value. Pricing for new products should start as soon as product development begins. The relevant costs for pricing are the incremental avoidable costs. A price may be profitable when it provides for incremental revenues in excess of incremental costs. A central organizing unit should administer the pricing function. Generally, it is better to avoid letting salespeople set price, especially without access to profitability information and specific training in pricing and revenue management. Pricing management should be viewed as a process and price setting as a daily management activity, not a once-a-year activity.

Special Pricing Situations Price Segmentation Value Chain (Distribution Channel) Pricing Price Flexibility Product Life Cycle Pricing