BUS 232. Marketing. pricing. Dr. Mohammed A. Nasseef

Transcription

1 Marketing BUS 232 pricing Dr. Mohammed A. Nasseef 1

2 Price -- Definition the amount of money charged for a product or service the sum of all the values that consumers exchange for the benefits of having or using the product or service Examples of price? Tuition, rent, fare, retainer, toll, salary/wage

3 Price Setting Customer perceptions of value Price ceiling No demand above this price Other internal & external considerations Marketing strategy, objectives, and mix Nature of the market and demand competitors strategies and prices 3 Product costs Price floor No profits below this price

4 Customer Value- Based pricing Like everything else in marketing, good pricing starts with customers and their perceptions of value Effective customer-oriented pricing involves understanding how much value consumers place on the benefits they receive from the products and setting a price that captures this value 4

5 Value-Based pricing VS. Cost-Based pricing Cost-based pricing Design a good product Determine product costs Set price based on cost Convince buyers of products value 5

6 Value-Based pricing VS. Cost-Based pricing cont. Value-based pricing Assess customer and value erception Set target price to match customer perceived value Determine costs that can be incurred Design product to deliver desired value at target price 6

7 Price-Quality Strategies Philip Kotler identified 9 price-quality strategies More and more marketer have adopted good value pricing strategies-offering combination of quality and good service at a fair price High Price Low Price High Quality Premium High Value Over Charging Mid Value Super Value Good Value Low Quality Rip-off 7 False Economy Economy

8 Price-Quality Strategies (cont.) Value-Added pricing : attaching value added features and service to differentiate a company's offers and charging a higher price. Example: Stag umbrella,the Indian company. 8

9 Type of Cost Fixed costs (also known as overhead)are costs that do not vary with production or sales level. Variable costs vary directly with the level of production. Total costs are the sum of the fixed and variable costs for any given level of production 9

10 Cost-Plus Pricing/Markup Calculation Adding a standard markup to the cost of the production. Cost and profit = 100% = $72 Manufacturer s selling price = 100% = $72 Markup = 20% = $18 Cost = 80% = $72 Wholesaler s selling price = 100% = $90 Markup = 40% = $60 Cost = 60% = $90 Retailer s selling price = 100% = $150 Cost to consumer = $150 MANUFACTURER WHOLESALER RETAILER CONSUMER

11 New-Product Pricing Strategies 1. Skimming pricing Charging a high price initially and reducing the price over time Commonly used when introducing new & innovative products in the ASPAC region 2. Penetration pricing Charging a low price when entering the market to capture market share Used when competitors are closing in with similar or better products 3. Intermediate pricing Pricing somewhere in between the skimming strategy and the penetration strategy 11

12 PRICE PRICE PRICE Price Strategies for New Products Penetration Pricing Low price establish product in the market Skimming Pricing Skimming Penetration High price/prestige pricing appeal to early adopters; recover high R&D costs Lower price over time Move inventory, stimulate Or extend product life

13 Price Adjustment Strategies Strategies Discount / allowance Segmented Psychological Promotional Geographical International Types of discounts Cash discount Quantity discount Seasonal discount Allowances Trade-in allowances Promotional allowances, payments or price reduction to reward dealers 11-13

14 Price Adjustment Strategies Strategies Discount / allowance Segmented Psychological Promotional Geographical International Types of segmented pricing strategies: Customer-segment Product-form pricing Location pricing Time pricing Certain conditions must exist for segmented pricing to be effective 11-14

15 Price Adjustment Strategies Strategies Discount / allowance Segmented Psychological Promotional Geographical International The price is used to say something about the product. Price-quality relationship Reference prices Differences as small as one Riyal can be important 11-15

16 Price Adjustment Strategies Strategies Discount / allowance Segmented Psychological Promotional Geographical International Temporarily pricing products below the list price or even below cost Loss leaders Special-event pricing Cash rebates Low-interest financing, longer warranties, free maintenance Promotional pricing can have adverse effects 11-16

17 Price Adjustment Strategies Promotional Pricing Problems Easily copied by competitors May erode brand s value Not a legitimate substitute for effective strategic planning Frequent use leads to industry price wars which benefit few firms Goal 3: Learn how companies adjust their prices 11-17

18 Price Adjustment Strategies Strategies Discount / allowance Segmented Psychological Promotional Geographical International Types of geographic pricing strategies: FOB-origin pricing Uniform-delivered pricing Zone pricing Basing-point pricing Freight-absorption pricing 11-18

19 Price Adjustment Strategies Strategies Discount / allowance Segmented Psychological Promotional Geographical International Prices charged in a specific country depend on many factors Economic conditions Competitive situation Laws / regulations Distribution system Consumer perceptions Corporate marketing objectives Cost considerations 11-19