Part Pricing Strategy

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					   Part Five:
Pricing Strategy
( Chapter10-Charpter11)




                          1
Price Defined (P.307)

• Price :The amount of money charged for a
  product or service,or the sum of the values
  that consumers exchange for the benefits of
  having or using the product or service.

• Dynamic pricing: Charging different prices
  depending on individual customers and
  situations.

                                                2
Factors affecting price decisions (P.309)

 •
Internal factors               External factors
                               Nature of the
Marketing                       market and
 objectives;                    demand;
                   Pricing     Competitors;
Marketing          decision
 mix strategy;                 Other
Costs;                          environment
Organizational                  factors(economy,
                                reseller, government)
 considerations


                                                  3
• Type of Cost : (P.313)



                 Variable   Total
    Fixed cost
                   cost      cost




                                    4
• Pricing in different types of markets

                                Monopolistic
  Pure competition              competition


                     Pricing


    Oligopolistic
                                Pure monopoly
    competition

                                                5
• Demand curve (P.354)



    P2                    P2
•
•   P1                    P1

•           Q2 Q1              Q2     Q1

•   A. Inelastic demand        B. Elastic demand

                                                   6
• Price elasticity of demand (P.382)



                     %Change in Quantity Demanded
Price Elasticity =
    of demand            %Change in price




                                                    7
General pricing approaches (P.320)


                                                         Consumer
     Product         Competitors’ prices and other
                                                        perceptions
    Costs            Internal and external factors
                                                       of value

    Price floor                                        Price ceiling
  No profits below                                   No demand above
     this price                                          this price




                                                                       8
Cost -Based Pricing(成本导向定价)

• Cost - plus pricing(成本加成定价)(P.320)
  e.g:
        Variable cost         $10
         Fixed cost       $300,000
         Expected unit sales 50,000


                                       9
                              Fixed Costs
Unit cost = Variable Cost +
                                Unit Sales
                    300000
         = $10 +                 = $16
                    50000

                          Unit Cost                  $16
Markup Price =                                   =            =$20
                 (1-- Desired return on sales)       1--0.2




                                                                 10
Breakeven Volume Pricing (target profit pricing)
  (目标利润定价)(P.321)

•     $
• 1200                             Total Revenue
• 1000                             Target Profit($20000)
• 800                                     Total Cost
• 600
• 400
• 200                                     Fixed Cost
•    0
•      10000 20000 30000 40000 50000           Q

                                                       11
Breakeven volume and profits at different prices

     (1)     (2)       (3)      (4)       (5)       (6)
•            Unit    Expected  Total     Total    Profit
            demand     unit
    price                     Revenue    cost     (4)-(5)
            needed   demand (1)*(3)
    $14     75000     71000   $994000   1100000   -$32000
    16      50000     67000   1072000   970000     102000
    18      37500     60000   1080000   900000     180000
    20      30000     42000    840000   720000     120000
    22      25000     23000    506000   530000     -24000




                                                            12
• Value- Based Pricing (认知价值定价)(322)
            Cost based pricing

 Product     Cost       Price     value   Customer



            Value-based pricing
 Customer    Value       Price     Cost    Product




                                                13
Competition -Based Pricing(竞争导向定价)
随行就市定价                   密封投标定价

           Going-rate             Sealed-bid
            pricing                pricing


•    BID        PROFIT    ASSUMED      EXPECTED
•                                        PROFIT
•   $9,500       $ 100      81%           $81
•    10000         600      36%            216
•    10500        1100      9%            99
•    11000        1600      1%            16
•
                                                  14
New-product Pricing Strategies (P.333)

     Market-Skimming         Market-Penetration
         Pricing                  Pricing


                            1、Market is high
   1、High quality and
                             price sensitive;
   image,enough buyer;
                            2、Cost is falling as
   2、Cost is not high for
                            sales volume increase;
   smaller volume;
                            3、Low price can keep
   3、Competitors hardly
                            out the competition。
   enter the market。
                                                     15
 Product-Mix Pricing Strategies
      STRATEGY                            DESCRIPTION
Product line pricing       Setting price steps between product
(系列定价)                     line items。
Optional-product pricing   Pricing optional or accessory products
(附件定价)                     sold with the main product。
Captive-product pricing    Pricing products that must be used
(诱饵定价)                                    with the main product。
By-product pricing         Pricing low-value by-products to get
(副产品定价)                                    rid of them。
Product-bundle pricing     Pricing bundles of products sold
(捆绑定价)                                     together。

                                                              16
Price-Adjustment Strategies
      STRATEGY                       DESCRIPTION
Discount and allowance   Reducing prices to reward customer
pricing                  responses such as paying early or
                         promoting the product。
Segmented pricing        Adjust prices to allow for differences
                         in customer,products,or locations。
Psychological pricing    Adjust price for psychological effect。
Promotional pricing      Temporarily reducing prices to
                          increase short-run sales。
Value pricing            Adjust prices to offer the right
                         combination at a fair price。
Geographical pricing     Adjust prices to account for location。

                                                         17
Price Changes


• Initiating Price Cuts;

• Initiating Price Increases;

• Buyer Reactions to Price Changes;


• Competitor Reactions to Price Changes.

                                           18
Assessing and responding to competition’s price
  changes ( P.347)
    Has competitor             Hold current price;
                         No
      cut price?               Continue to monitor
                               Competitor’s price
             Yes
    Will low price      No
  negatively affect out           Reduce price
 market share & profit?
                                 Raise perceived
              Yes        No          quality
  Can/should effective           Improve quality
   action be taken?      Yes     & increase price
                                 Launch low-price
                                 “fighting brand”

                                                     19

				
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