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Marketing. Chapter 13. Pricing Goods and Services. Gilbert A. Churchill, Jr. J. Paul Peter. The Pricing Process - I. Slide 13-1. Figure 13.2. Evaluate Customer Response and other Pricing Constraints. Set Pricing Objectives. Make Price Adjustments as Needed.

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Marketing

Chapter 13

Pricing Goods and Services

Gilbert A. Churchill, Jr. J. Paul Peter


The Pricing Process - I

Slide

13-1

Figure

13.2

Evaluate Customer Response and other Pricing Constraints

Set Pricing Objectives

Make Price Adjustments as Needed

Analyze Profit Potential

Set Initial Price


Pricing Objectives

Slide

13-2

Pricing Objective

Examples

Segmentation and Positioning Objectives

Support Efforts to Position Product for Market Target

Sales and Profit Objectives

Achieve desired levels of sales and earn targeted level of profits

Compete in terms of relative price or market share

Competitive Objective

Survival Objective

Enable organization to survive

Social Responsibility Objective

Meet a standard of social responsibility


Segmentation and Positioning Objectives

Slide

13-3

Table

13.1

Price Level

Value Position

Examples

High relative to product class

High value because of quality and prestige.

Nike athletic shoes (such as Air Jordans); dental work by a widely respected specialist.

Around average for product class

High value because of good quality at a reasonable price.

Keds tennis shoes; dental work by the neighborhood family dentist.

Low relative to product class

High value because of acceptable quality at a low price.

Generic or private-label shoes at a drugstore or discount store; dental work by students being trained at a university clinic.


The Pricing Process - II, III, IV

Slide

13-4

Figure

13.2

Evaluate Customer Response and other Pricing Constraints

Set Pricing Objectives

Make Price Adjustments as Needed

Analyze Profit Potential

Set Initial Price


Set Initial Price - Strategies for Pricing New Products

Slide

13-5

Price Skimming

$

PenetrationPricing

Time


Set Initial Price - Strategies for Pricing Existing Products

Slide

13-6

Product Characteristics

Examples

Perishability

This includes physical perishability (bananas) as well as demand running out over time (Christmas cards)

Distinctiveness

The product must be distinct enough from the competition in terms of quality, branding, design, and features

Life Cycle Stage

As the product goes from the introductory, growth, maturity and decline, the price must continuously decrease


Pricing Product Lines

Slide

13-7

Uniform Pricing

Price Lining

all books$40.00

$1.00

all CD’s$15.95

$1.00

all Cassettes$9.95

$1.00


The Pricing Process - V

Slide

13-8

Figure

13.2

Evaluate Customer Response and other Pricing Constraints

Set Pricing Objectives

Make Price Adjustments as Needed

Analyze Profit Potential

Set Initial Price


Adjusting Prices - Discounting

Slide

13-9a

Table

13.2

Discount

Definition

Example

Quantity discount

Reduction in the price per unit for purchasing a larger quantity

A catalog for Gardener’s Supply Company offers 1 cedar planter for $32.95 and 2 or more for $30.00 each.

Seasonal discount

Price reduction offered during times of slow demand

A ski resort offers lower prices during the summer.

Trade discount

Percentage reduction from list price offered to resellers

A publisher sells books to a chain of stores for a fraction of the retail price.

Cash discount

Incentive for buyers to pay quickly or a lower price for payment of cash

An organization receives an invoice that reads, “2/10 net 30.”


Adjusting Prices - Allowances

Slide

13-9b

Table

13.2

Discount

Definition

Example

Trade-in allowance

Discount for providing a product along with monetary payment

A car dealer offers $1,000 off the list price in exchange for a buyer trading in her used car.

Promotional allowance

Price reduction in exchange for the reseller performing certain promotional activities

A frozen-pizza maker gives a price break to a supermarket that promises to feature the product in its advertising.


Adjusting Prices - Others

Slide

13-9c

Table

13.2

Discount

Definition

Example

Promotional discount

Short-term discount to stimulate sales or convince buyers to try a product

A Jiffy Lube franchise passes out flyers offering $5 off on an oil change; the discount is good for 30 days.

Loss leader pricing

Setting prices near or below cost in order to attract customers to a store

A supermarket features bananas at 20 cents a pound and Pampers diapers at 50 percent off; the price is below cost, but the store expects buyers to purchase additional items selling at a profit.


Every-Day Low Price

Slide

13-10

Promotional Discount Strategy

EDLP Strategy

Sell100$10.99

Sell 10 $15.99

Sell 20 $11.99

Sell 70 $9.99


Psychological Pricing

Slide

13-11

Table

13.3

TYPE DESCRIPTION EXAMPLE

Pricing Technique

Definition

Example

Product

Prestige Pricing

Setting a high price to convey an image of high quality or exclusivity

The Porsche 911 turbo coupe has a base price of $105,000.

Table 13.3 missing

Office Depot advertises a GE cellular phone for $39.99.

Setting prices a few dollars or cents below a round number

Odd-even pricing

Bundle pricing

A hotel quotes a rate for an over-night stay that includes breakfast the next morning.

Offering several products as a package at a single price


Geographic Pricing

Slide

13-12

Geographic Pricing Pricing a good or service according to where it is delivered.

FOB Origin Pricing Seller’s price is for the goods at point of shipment, where title passes from buyer to seller.

Uniform Delivered Pricing Seller’s price includes shipping; title passes where buyer receives the goods.

Single-zone Pricing Pricing in which all buyers pay the same price, including delivery.

Multiple-zone pricing Pricing in which buyers in different zones pay different delivery prices.

FOB with freight allowed Pricing in which the seller allows the buyer to deduct shipping costs from the quoted price of the product.

Basing point pricing Pricing in which the seller charges the quoted price plus the cost of delivering from a basing point where the product is made.


Evaluating Pricing

Slide

13-13

TYPE DESCRIPTION EXAMPLE

Response

Example

Product

Competitor Response

Response to Low Prices

Price war - repeated price reductions

Reposition as being higher quality

Table 13.3 missing

Response to High Prices

Increase their own prices

Consumer Response

Light Demand

A signal that the price may be too high

May have to modify other elements of the marketing mix

Heavy Demand

A signal that the price may be too low

May have to modify other elements of the marketing mix


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