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Chapter 15

Chapter 15. Designing Pricing Strategies and Programs. Marketing Management Tenth Edition Philip Kotler. Objectives. Setting the Price Adapting the Price Initiating & Responding to Price Changes. Price High Medium Low. Premium Value. High Value. Super Value. High.

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Chapter 15

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  1. Chapter 15 Designing Pricing Strategies and Programs Marketing Management Tenth Edition Philip Kotler

  2. Objectives • Setting the Price • Adapting the Price • Initiating & Responding to Price Changes

  3. Price High MediumLow Premium Value High Value Super Value High Overcharging Medium Value Good-Value Product Quality Med Rip-Off False Economy Economy Low Price - Quality Strategies

  4. 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price Setting Pricing Policy 1. Selecting the pricing objective

  5. Types of Costs Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials • Total Costs • Sum of the Fixed and Variable Costs for a Given • Level of Production

  6. Low Price No possible profit at this price High Price No possible demand at this price The Three C’s Modelfor Price Setting Costs Competitors’ prices and prices of substitutes Customers’ assessment of unique product features

  7. Pricing Methods • Markup Pricing • Target Return Pricing • Perceived Value Pricing • Value Pricing • Going-Rate Pricing • Sealed-Bid Pricing

  8. Utility: The attribute that makes it capable of want satisfaction Value: The worth in terms of other products Price: The monetary medium of exchange. Value Example: Caterpillar Tractor is $100,000 vs. Market $90,000 $90,000 if equal 7,000 extra durable 6,000 reliability 5,000 service 2,000 warranty $110,000 in benefits -$10,000 discount! Some important pricing definitions

  9. Promotional Pricing • Loss-leader pricing • Special-event pricing • Cash rebates • Low-interest financing • Longer payment terms • Warranties & service contracts • Psychological discounting

  10. A 32 oz. $2.19 B 26 oz. $1.99 Psychological Pricing • Most Attractive? • Better Value? • Psychological reason to price this way? Assume Equal Quality

  11. CustomerSegment Product-form Location Time Discriminatory Pricing

  12. Hold our price at present level; continue to watch competitor’s price No No No Yes Is the price likely to significantly hurt our sales? Is it likely to be a permanent price cut? How much has his price been cut? Yes Yes By less than 2% Include a cents-off coupon for the next purchase By 2-4% Drop price by half of the competitor’s price cut By more than 4% Drop price to competitor’s price Price-Reaction Program for Meeting a Competitor’s Price Cut Has competitor cut his price?

  13. Review • Setting the Price • Adapting the Price • Initiating & Responding to Price Changes

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