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					MARKETING MANAGEMENT


           Pricing




                     10-1
Chapter Questions

• How do consumers evaluate prices?
• How should a company set prices initially for
  products or services?
• How should a company adapt prices to meet
  varying circumstances?
• When should a company change prices?


                                            14-2
Whirlpool’s Duet
combo is nearly
four times the
price of
comparable
models



             14-3
Common Pricing Mistakes
 • Determine costs and add traditional
   industry margins
 • Failure to revise price to capitalize on
   market changes
 • Setting price independently of the rest
   of the marketing mix
 • Failure to vary price by product item,
   market segment, distribution channels,
   and purchase occasion
                                              14-4
Consumer Psychology and Pricing


             Reference Prices

             Price-quality inferences

                    Price endings

                         Price cues


                                        14-5
Examples of Price Cues

 • “Left to right” pricing ($299 versus $300)
 • Odd number discount perceptions
 • Even number value perceptions
 • Ending prices with 0 or 5
 • “Sale” written next to price



                                            14-6
When to Use Price Cues
• Customers purchase
  item infrequently
• Customers are new
• Product designs vary
  over time
• Prices vary seasonally
• Quality or sizes vary
  across stores


                           14-7
Step 1: Determine your Objective

                   • Survival
                   • Maximum current
                     profit
                   • Maximum market
                     share
                   • Maximum market
                     skimming
                   • Product-quality
                     leadership

                                       14-8
Price Tiers in the Ice Cream Market




                                      14-9
Step 2: Determine Demand


  Price Sensitivity

    Estimating
  Demand Curves

  Price Elasticity
    of Demand

                           14-10
Inelastic and Elastic Demand




                               14-11
Step 3: Estimate Costs

                    Types of Costs
                     Accumulated
                      Production
                    Activity-Based
                    Cost Accounting
                    Target Costing

                                 14-12
Cost Terms and Production

 • Fixed costs
 • Variable costs
 • Total costs
 • Average cost
 • Cost at different levels of production




                                            14-13
Cost per Unit based on Production




                                    14-14
Step 4: Analyze Competition


               Reality check!
    What are your competitors charging?
        Compare features or service.
  Is your price reasonable and competitive?



                                          14-15
Step 5: Select a Pricing Method

              • Markup pricing
              • Target-return pricing
              • Perceived-value pricing
              • Value pricing
              • Going-rate pricing
              • Auction-type pricing



                                          14-16
Break-Even Chart




                   14-17
Auction-Type Pricing?


                   English auctions

                    Dutch auctions

                  Sealed-bid auctions


                                     14-18
Step 6: Select the Final Price

• Impact of other marketing activities
• Company pricing policies
• Gain-and-risk sharing pricing
• Impact of price on other parties




                                         14-19
Price-Adaptation Strategies

            Geographical Pricing

             Discounts/Allowances

                 Promotional Pricing

                  Differentiated Pricing


                                       14-20
Importance of Price on Profits




                                 14-21

				
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posted:5/19/2013
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