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Applied marketing . Session 5. Yummy Bar 12.50 kc. Choco -Bar 9.90 kc. What does Price do?. Names Terms of Exchange Signifies Quality Shapes the Value of the Product How? Motivating consumer to rethink and better understand what they are being offered.

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Applied marketing

Yummy Bar 12.50 kc

Choco-Bar 9.90 kc

What does price do
What does Price do?

  • Names Terms of Exchange

  • Signifies Quality

  • Shapes the Value of the Product

    • How?

    • Motivating consumer to rethink and better understand what they are being offered

What you need to know before determining price
What you need to know before determining price

  • Costs

  • Competitors

  • Customers and Value

  • Corporate Strategy

The 3 c s and pricing models
The 3 C’s and Pricing Models


  • Markup pricing

  • Going-rate pricing

  • Perceived-value pricing

  • Value pricing

  • Premium pricing

  • Auction-type pricing

Analyze competitors costs prices and offers
Analyze competitors’ costs, prices and offers

  • Consider the nearest competitor’s price

  • Evaluate worth to customer for differentiated features

  • Judge whether the customer will be willing to pay more

  • Anticipate response from competition – what would you do in competition’s place?

Where do customers perceive value
Where do customers perceive value?

  • Features

  • Buyer’s image of product performance

  • Ability to deliver on time

  • Warranty

  • Customer support

  • Supplier reputation

  • Trustworthiness and Reliability

  • Esteem

  • End user of the product

Strategic decisions the pricing objective
Strategic Decisions: the pricing objective

  • Survival

  • Maximum current profit

  • Maximum market share

  • Maximum market skimming

  • Product-quality leadership

Price adaptation strategies
Price-adaptation strategies

Geographical pricing


Promotional pricing

Differentiated pricing

Bundle pricing

Communicating with customers by using price
Communicating with Customers by Using Price

  • Commodification = Products become “commodities”

    • Skepticism, routinized behavior, minimal expectations, prefer swift and effortless transactions

    • All product dimensions are equally palatable, differences are not worth investigating

    • Not about products, but about customers (vs. actual commodities)

    • Objective is to reengage buyer who is past caring

    • Tires, Explosives, Car Insurance

Using price change parameters
Using Price – Change Parameters

  • Adjust price structure to clarify advantages

  • Move away from “units sold” model

  • Examples

    • Goodyear, price on “miles/km” expectation, rather than engineering

    • Orica, price on fragmentation of rock rather than explosive

    • Norwich Union, insurance based on miles driven, rather than risk

Using price overpricing
Using Price - Overpricing

  • Thought-provoking effect of moderate overpricing (50% to 80%)

  • Consumer: “Why is this so much more expensive?”

  • Revives considerations and recall of other features

  • Apple computers, Starbucks, etc.

Using price partitioning
Using Price - Partitioning

  • Use partitioning to highlight overlooked benefits

  • Showing broken down pricing can cause consumers to revise behavior

  • Unbundling

    • Cable television (channels, set top box, internet)

    • Low cost airlines (flight, luggage, food)

Using price single price point
Using Price – Single Price Point

  • Customer focuses on choice, rather than price

  • Swatch -- which is right for me?

  • iTunes

Using price free
Using Price – Free

  • Power of Free

  • Free $10 gift certificate, or seven dollars for a $20 gift certificate

  • Amazon France

    • Shipping for 1 Franc (vs. free)

Presenting the price
Presenting the price


  • Use a comparison

    • TiVo (VCR vs. Computer)

    • $200 vs. $1000

  • Apple iPhone

    • $600 to $400

    • Anchor high value


  • ‘Left to right’ pricing ($299 versus $300)

  • Odd number discount perceptions vs. Even number value perceptions

  • ‘Sale’ written next to price

  • Limited availability

What is a brand
What is a brand?

A brand is a name, term, sign, symbol or design or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

Distinguishing between brand identity and brand image
Distinguishing between brand identity and brand image

  • Brand identity is the way a company aims to identify or position itself or its product or service; the visual or verbal expressions of a brand which leads to the psychological or emotional associations that the brand aspires to maintain in the minds of the consumer.

  • Brand image is the way the public actually perceives this aim.

The role of brands for firms 1
The role of brands – for firms (1)

Legal protection

Create loyalty

Serve as a competitive advantage

Secure price premium

The role of brands for firms 2
The role of brands – for firms (2)

Increase marketing efficiency

Attract employees

Elicit support from channel partners

Help segment markets

The role of brands for customers
The role of brands – for customers

Signify quality level

Facilitate purchasing

Reduce risk