Gilbert A. Churchill, Jr. J. Paul Peter

1. Marketing Chapter 13 Pricing Goods and Services Gilbert A. Churchill, Jr. J. Paul Peter

2. 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

3. 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

4. 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.

5. 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

6. Set Initial Price - Strategies for Pricing New Products Slide 13-5 Price Skimming $ PenetrationPricing Time

7. 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

8. 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

9. 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

10. 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.”

11. 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.

12. 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.

13. 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

14. 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

15. 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.

16. 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