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Pricing Strategy for Business Markets.ppt

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					Pricing Strategy for
Business Markets
      Chapter 15
                 The Meaning Value
n   The Importance of Price
n   Customer Value
    • “Business customers’ overall assessment of the utility of a
      relationship with a supplier based on benefits received and
      sacrifices made.”
n   Benefits
    • Core benefits
    • Add-on Benefits
        n   Three examples
n   Sacrifices
    • Total Cost in Use
        n   Acquisition
        n   Possession
        n   Usage
n   Value-Based Strategies
           Pricing Process
1.   Set Strategic Pricing Objectives
2.   Estimate Demand and Price
     Elasticity of Demand
3.   Determine Costs and Relationship
     to Volume
4.   Examine Competitors’ Prices and
     Strategies
5.   Set the Price Level
                 Step 1:
     Set Strategic Pricing Objectives
1.   Three goals
     1. ___________________
     2. ___________________
     3. ___________________



2.   Dow v. DuPont
                    Step 2:
    Estimate Demand and Price Elasticity of Demand

n   What to Look At
n   Assessing Value
    • Isolate important attributes and
      perceptions
    • Four strategies
                              Step 2:
Estimate Demand and Price Elasticity of Demand
n   Elasticity of Demand
    •   What does it measure?
    •   Satisfied customers= Less price sensitivity
    •   Customized solution means higher price
    •   What increases price sensitivity?
         n   Easy to shop around
         n   Easy price comparisons
         n   Buyers can switch without extra costs
n   Inelastic when price comprises large part
    of total cost
n   Focus on end-use
n   Value-based segmentation
                          Step 3:
    Determine Costs and Relationship to Volume
n   Target costing
    • What is it?
n   Classifying costs
    • Three types
      n   Direct traceable or attributable costs
           • Raw materials
      n   Indirect traceable costs
           • General plant overhead
      n   General costs
           • Administrative costs of sales districts
                       Step 4:
    Examine Competitors’ Prices and Strategies
n   Is price the only thing customers
    look at?
n   Hypercompetitive Rivalries
    • Characteristics
    • First-movers
      n   Advantages
    • Followers
      n   Advantages
    Pricing Products in the Life Cycle
n   Analyze from __________ perspective
n   Skimming
    •   What is it?
    •   When to use it?
    •   Time segmentation
n   Penetration
    • What is it?
    • When to use it?
n   Product Line Consideration
n   Legal Considerations
    • Robinson-Patman Act
    Responding to Price Attacks
n   Evaluating the Threat
    • Is there a response that would cost you
      less than the preventable sales loss?
      n   3 ways to decrease threat
    • If you respond, is the competitor willing
      and able to lower price again to restore
      difference?
      n   Why are they focusing on price?
    Responding to Price Attacks
    • Will multiple responses that maybe required to
      match a competitor’s prices still cost less than
      the available sales loss?
       n   Allow them to win?
       n   Create barriers
    • Is your position in other markets at risk if the
      competitor gains marketshare? Does the value
      of all the markets at risk justify the cost of the
      strategy response?
       n   Look at costs and benefits
n   Two general rules
          Competitive Bidding
n   Two forms
    • Gain understanding of prices
    • Reverse auctions
n   Closed bidding
n   Open bidding
    • Online open bidding
n   Strategies
    • How to gain profitability?

				
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posted:2/12/2014
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