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Phillip. Kevin Lane. Kotler • Keller. Marketing Management • 14e. Chapter 14. Developing Pricing Strategies and Programs. Discussion Questions. How do consumers process and evaluate prices? How should a company set prices initially for products or services?
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Phillip Kevin Lane Kotler • Keller Marketing Management • 14e
Chapter 14 Developing Pricing Strategies and Programs
Discussion Questions • How do consumers process and evaluate prices? • How should a company set prices initially for products or services? • How should a company adapt prices to meet varying circumstances and opportunities? • When should a company initiate a price change? • How should a company respond to a competitor’s price change?
Marketing Mix Revenue Producer Cost Promotion Place Cost Cost
Pricing $31.50 $33.50 Bargaining
Changing Price Environment Buyers I’ll pay $235.00 Instant Price Comparisons Get Products Free Name Your Own Price
Changing Price Environment Sellers $29.99 $19.99 $24.99 Monitor Customers Negotiate Prices Selective Pricing
How Companies Price Product-line Managers (w/guidance) Small Business Owner Pricing Department
Consumer Psychology and Pricing Price-Quality Inferences Reference Prices $1.99 Price Endings
A Black T-Shirt Armani - $275 Gap - $14.90 H&M - $7.90
Setting the Price 6 Select Final Price 5 Price Method 4 Competitor Analysis 3 Estimate Costs 2 Determine Demand 1 Pricing Objective
Selecting the Pricing Objective Survival Maximum Current Profit Maximum Market Share Maximum Market Skimming Product-Quality Leadership Other Objectives
Determining Demand Price sensitivity Estimating demand curves Price Elasticity of Demand
Figure 14.1 Inelastic and Elastic Demand
Estimating Costs Demand Price Ceiling Price Price Floor Profit Costs
Estimating Costs Types of costs Fixed Costs (overhead) Variable Costs Total Costs
Figure 14.2 Costs at Varying Levels of Production
Estimating Costs Accumulated Production Experience Curve (Learning Curve)
Estimating Costs Target Costing Design engineers Market research
Figure 14.3 The Experience Curve
Analyzing Competitors’ Offers Price Costs Reaction “A” “B” Worth to Customer
Selecting a Pricing Method • Pricing Methods • Markup • Target-return • Perceived-Value • Value • Going-rate • Auction-type
Figure 14.4 High Price (No possible demand at this price) Ceiling priceCustomers’ assessment of unique product features Orienting point Competitors’ prices and prices of substitutes Costs Floor Price Three Cs Model for Price Setting Low Price (No possible profit at this price)
Markup Pricing Variable cost per toaster $10 Fixed costs $300,000 Expected unit sales 50,000
Figure 14.5 Target-Return Pricing
Perceived-Value Pricing • Customer’s perceived-value • Performance $$$ • Warranty $ • Customer support $ • Reputation $$
Value Pricing EDLP Level of Quality THOUSANDS OF LOW PRICES EVERY DAY throughout the store High Pricing Low P1 C1 P2 C2
Going-Rate Pricing Commodities Follow the Leader
Auction Pricing English auction (ascending bids) Dutch auction (descending bids) Sealed-bid auction
Selecting the Final Price Impact on others Brand Quality Pricing Policies Gain-and-risk-sharing
Adapting the Price Geographic Pricing Differentiated Pricing Price Discounts and Allowances Promotional Pricing
Dealing with Price Changes Raising Prices Cutting Prices Competitor Moves