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Marketing Management 2nd Edition

Marketing Management 2nd Edition. Michael R. Czinkota and Masaaki Kotabe. Chapter 10: Pricing Decisions. Chapter Outline. Importance of price Services prices Price for non-profit organizations Supply and demand Price elasticity of demand Three ways to measure demand

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Marketing Management 2nd Edition

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  1. Marketing Management2nd Edition Michael R. Czinkota and Masaaki Kotabe Chapter 10: Pricing Decisions

  2. Chapter Outline • Importance of price • Services prices • Price for non-profit organizations • Supply and demand • Price elasticity of demand • Three ways to measure demand • Factors affecting demand elasticity • Pricing strategies • Practical pricing policies • Discounts • Pricing strategy

  3. Three variables that determine profit: Importance of Price - X = Sales Volume Price Cost Profit

  4. Service Prices • Differences in pricing for services: • Negotiation • Discounts • Quality

  5. Price for Non-Profit Organizations • Surplus • Allocation of service • Queuing • Price is perceived value.

  6. Supply and Demand Equilibrium Price Supply curve Price Demand curve Quantity

  7. Price Elasticity of Demand % change in demand Price elasticity of demand = % change in price

  8. Three Ways to Measure Demand • Statistical analysis of historical data • Survey research • Experiment

  9. Factors Affecting Demand Elasticity:Organization Factors • Product life cycle • Product portfolio • Product line pricing • Segmentation and positioning • Branding

  10. Factors Affecting Demand Elasticity:Customer Factors • Demand • Benefits • Value • Distribution channel

  11. Factors Affecting Demand Elasticity:Market Factors • Competition • Economic and regulatory environment • Exchange rate • Geography

  12. Pricing Strategies Price Skimming: Price HIGH • Inelastic prices • New or unique product • Distinct market segments • Quality important • Competitive costs unknown Penetration Pricing: Price LOW • Elastic prices • Competitors can enter market • No distinct market segments • Products undifferentiated • Economies of scale

  13. Practical Pricing Policies • Cost-plus pricing • Target pricing • Historical pricing • Product line pricing • Competitive pricing • Market-based pricing • Selective pricing

  14. Discounts • Trade discounts • Quantity discounts • Cash discounts • Allowances • Seasonal discounts • Promotional pricing • Individual pricing • Optional features • Product bundling • Value package • Psychological pricing $11.99 $9.99

  15. Pricing Strategy Price wars Other price reductions Price increases

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