1 / 24

Pricing Strategy

Pricing Strategy. MKT 460 (Strategic Marketing) Taufique Hossain. Consumer Psychology and Pricing. Reference Prices: Comparing an observed price to an internal reference price they remember or to an external frame of reference such as posted ‘regular retailed price’

victor-strickland
Download Presentation

Pricing Strategy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Pricing Strategy MKT 460 (Strategic Marketing) TaufiqueHossain

  2. Consumer Psychology and Pricing • Reference Prices: Comparing an observed price to an internal reference price they remember or to an external frame of reference such as posted ‘regular retailed price’ • Price-quality inferences: Consumers use price as an indicator of quality. • Price Cues: Consumers perception of prices are also affected by alternative pricing strategies.

  3. Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price

  4. Step 1: Selecting the Pricing Objective • Survival • Maximum current profit – Market penetration pricing • Maximum market share • Maximum market skimming • Product-quality leadership

  5. Step 2: Determining Demand Price Sensitivity Estimating Demand Curves Price Elasticity of Demand

  6. Price sensitivity Customers are less price sensitive when: • There are few or no substitute or competitors • They do not readily notice the higher price • They are slow to change their buying habits • They think that the higher prices are justified • Price is only a small part of the total cost of obtaining, operating and servicing the product over its lifetime.

  7. Inelastic and Elastic Demand

  8. Estimating demand curves • Surveys • Price experiments • Statistical analysis • Experience/past performance analysis

  9. Estimating demand curves

  10. Step 3: Estimating Costs Types of Costs Accumulated Production Target Costing

  11. Cost Terms and Production • Fixed costs • Variable costs • Total costs • Average cost • Cost at different levels of production

  12. Cost per Unit as a Function of Accumulated Production

  13. Step 5: Selecting a Pricing Method • Markup pricing • Target-return pricing • Perceived-value pricing • Value pricing • Going-rate pricing • Auction-type pricing • Product line pricing

  14. Break-Even Chart

  15. Step 6: Selecting the Final Price • Impact of other marketing activities • Company pricing policies • Gain-and-risk sharing pricing • Impact of price on other parties

  16. Price-Adaptation Strategies Geographical Pricing Discounts/Allowances Promotional Pricing Differentiated Pricing

  17. Countertrade Barter Compensation deal Buyback arrangement Offset Discounts/ Allowances Cash discount Quantity discount Functional discount Seasonal discount Allowance Price-Adaptation Strategies

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

  19. Differentiated Pricing • Customer-segment pricing • Product-form pricing • Image pricing • Channel pricing • Location pricing • Time pricing • Yield pricing

  20. Initiating and responding to price changes • Initiating price cuts • Low quality trap • Fragile market share trap • Shallow pocket trap • Price war trap • Initiating price increase • Delayed quotation pricing • Escalating clauses • Unbundling • Reduction of discounts

  21. Reactions to competitive price cuts

  22. Reactions to competitive price cuts

More Related