Marketing week 6 - lecture note PDF

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Price ! >Is the amount of Money charged for a product or service ! > is the sum of all the value that customer give up in order to gain the benefits of having or using a product or service ! Why pricing is important ! > Price is the only element in the marketing mix that produces revenue , all other elements represent costs ! > one of the most flexible marketing mix element- can be changed quickly >creating and capturing customer value >Direct impact the bottom line > creating customer value and building customer relationships

Major pricing strategy Price ceiling ! -no demand above this price ! Price floor ! -no profits below this prices ! Three main approaches to pricing ! Customer value based pricing Setting the price based on buyers’s perception of value not the seller’s cost ! !

Value based pricing (access customer needs first then only design or develop the product)! Cost based pricing(design the product first and then convince the buyer)! -good value pricing Offering just the right combination of quality and good service at a fair price !

- introducing less expensive version of established brand name product ! - Redesigning existing brand to offer more quality ! -Everyday low price (EDLP) ! - hight low pricing ( charging higher price everyday running frequent promotion)!

- value added pricing Rather than cutting price to match competitors prices, markers adopting this strategy attach value -added features and services to differentiate their offerings and this supports higher prices.!

Cost-Based pricing >Setting prices based on the costs of production , distributing and selling product plus a fair rate of return ! Types of costs >Fixed cost ( overhead)! Cost that do not vary with production or sale level ! >variable costs ! Cost that vary directly with the level of production ! >total costs ! Sum of the fixed cost and variable costs for any given level of production !

Cost-plus pricing (markup pricing)! >is adding a standard makeup to the cost of the product ! > typically used by professional services ( lawyer , accountant )! . it ignores consumer demand and competitor pricing ! - sellers are more confident about the cost than the demand !

Breakeven pricing ( target return pricing) Is the price to break even on the cost of making !

Competition-based pricing ! Setting pricers baed on competitor strategies , costs prices and market offerings ! > consumer make their judgment of product value by comparing the prices that competitors charge for similar product .! >the goal of Competition-based pricing is not to match or beat competitors prices rather to set prices according to the relative value created versus competitors ! >a company creates greater value for customer, higher prices are justified !

Other internal and external consideration in pricing! Marketing strategy , objective and mix - attract new customer or to profitably retain existing customer ! - Deter new competitors from entering the market! - Avoid government intervention or retain the loyalty ! - To help the sales of other products in the line !

Organisational considerations -Small companies , price are often set by top management rather than by the marketing department ! - large companies , pricing is typically handled by divisional or product line managers ! The market and the demand Pricing can differ based on the type market ! 1 pure competition >Seller cannot charge more than the going price because buyers can obtain as much as they need at that price! >there are large number of buyer and seller ( undifferentiated)! ! 2 monopolistic competition A range of pricing occurs beach seller can differentiated their offer (differentiated)! 3 oligopolistic competition ! Seller are highly sensitive to each other pricing and market strategies ( example bank)!

4 pure monopoly Pricing is handled differently depending on whether it is a government monopoly or regulated monopoly ! One supplier can determine price without regard for competition ! ! Price elasticity a measure of the sensitivity of demand to changes in price ! Elastic demand - when demand change greatly with changes in price ! Inelastic demand - when demand hardly changer with a small change in price !

New product pricing strategies When companies bring out a new product can choose between 2 broad strategies to set the price ! Market skimming pricing Setting a higher initial price for a new product to skim maximin revenue from the segments willing to pay the high price the company makes fewer but more profitable sales .! >the product quality and image supports its higher price ! >typically used in shopping and speciality goods ! >enough buyer want the product at that price !

Market penetration pricing ! Setting a low price for a new product in order to attract a large number of buyers and a large market share ! >used in convenience good ! > the low price help keep out the competition ! >Purchase intervals are short !

Product mix pricing strategies ! Product line pricing Setting prices across an entire product line ! Optional product pricing ( pay more to get something extra) Pricing optional or accessory products sold with the main product ! Captive product pricing Pricing product that must be used with the main product ! By product pricing Pricing low-value by product to get rid of them or to make money on them and the main product ! Product bundle pricing Pricing bundles of product sold together !

! Price-adjustment strategies ! Discount and allowance pricing Reducing prices to reward customer responses (volume purchases , paying early)! Segmented pricing Adjust prices to allow for differences in customer, product or location ( different price or adult , senior or children)! Psychological pricing (reference prices ) remember the past pricing ! Adjustment pricing for Psychological effect! Promotional pricing (discount , special event)! Temporarily reducing prices or increase sales ! Geographical pricing ! Adjusting prices to account for the location of customer ( eBay delivery )! Dynamic / online pricing Adjusting prices continually to meet the characteristics and needs of individual customer situation ( flight ticket different hrs have different price)!

Pricing changes Initiating price changes ! When initiating prices changes (whether cut to increase) marketers must consider ! Buyer reactions ! Competitor reaction ! Public policy Prohibited practice ! . Price fixing ; talking to competitors to fix prices ! .predatory pricing ; selling below cost with the intention of punishing a competitors out of business !

. Price discrimination ; offering different prices to trading different customer ! . Resale price maintenance ; manufacturer cannot require retailers to charge specified prices ! . Deceptive pricing ; stating or advertising prices that are not available to customer !...