Kotler POM13e Student 10
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Transcript of Kotler POM13e Student 10
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Chapter 10 - slide 1Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter Ten
Pricing:
Understanding and Capturing
Customer Value
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Chapter 10 - slide 2Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Pricing ConceptsUnderstanding and
Capturing Customer Value
What Is a Price?
Customer Perceptions of Value
Company and Product Costs
Other Internal and External
Considerations Affecting Price
Decisions
Topic Outline
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Chapter 10 - slide 3Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Price is the amount of money charged for aproduct or service. It is the sum of all thevalues that consumers give up in order to
gain the benefits of having or using aproduct or service.
Price is the only element in the marketing mix
that produces revenue; all other elementsrepresent costs
What Is a Price?
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Chapter 10 - slide 4Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider When SettingPrices
Understanding how much value
consumers place on the benefits theyreceive from the product and setting a
price that captures that value
Customer Perceptions of Value
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Chapter 10 - slide 5Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider When SettingPrices
Value-based pricinguses the buyers
perceptions of value, not the sellerscost, as the key to pricing. Price isconsidered before the marketingprogram is set.
Value-based pricing is customer driven
Cost-based pricing is product driven
Customer Perceptions of Value
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Chapter 10 - slide 6Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Value-based pricing
Good-value pricing
Value-added pricing
Customer Perceptions of Value
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Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Good-value pricing offers the right
combination of quality and good service tofair price
Existing brands are being redesigned to offermore quality for a given price or the same
quality for less price
Customer Perceptions of Value
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Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Everyday low pricing (EDLP) involves
charging a constant everyday low price withfew or no temporary price discounts
High-low pricing involves charging higherprices on an everyday basis but running
frequent promotions to lower prices
temporarily on selected items
Customer Perceptions of Value
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Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Value-added pricing attaches value-addedfeatures and services to differentiate offers,support higher prices, and build pricingpower
Pricing poweris the ability to escape pricecompetition and to justify higher prices andmargins without losing market share
Customer Perceptions of Value
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Chapter 10 - slide 10Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Cost-based pricing involves setting prices
based on the costs for producing,distributing, and selling the product plus a
fair rate of return for its effort and risk
Company and Product Costs
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Chapter 10 - slide 11Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Cost-based pricing adds a standard markup to
the cost of the product
Company and Product Costs
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Chapter 10 - slide 12Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Fixedcosts
Variablecosts
Totalcosts
Company and Product Costs
Types of costs
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Chapter 10 - slide 13Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Fixed costs are the costs that do not vary with
production or sales level Rent
Heat
Interest Executive salaries
Company and Product Costs
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Chapter 10 - slide 14Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Variable costs are the costs that vary with the
level of production Packaging
Raw materials
Company and Product Costs
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Chapter 10 - slide 15Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Total costs are the sum of the fixed and
variable costs for any given level ofproduction
Average cost is the cost associated with a
given level of output
Company and Product Costs
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Chapter 10 - slide 16Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Experience or learning curve is when
average cost falls as production
increases because fixed costs are
spread over more units
Costs as a Function of Production Experience
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Chapter 10 - slide 17Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Cost-plus pricing adds a standard markup
to the cost of the product
Benefits Sellers are certain about costs
Prices are similar in industry and price competition is
minimized
Consumers feel it is fair
Disadvantages Ignores demand and competitor prices
Cost-Plus Pricing
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Chapter 10 - slide 18Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Break-even pricing is the price at which total
costs are equal to total revenue and there isno profit
Target profit pricing is the price at which the
firm will break even or make the profit itsseeking
Break-Even Analysis and Target ProfitPricing
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Chapter 10 - slide 19Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Customer perceptions of value set the
upper limit for prices, and costs set thelower limit
Companies must consider internal and
external factors when setting prices
Other Internal and ExternalConsiderations
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Chapter 10 - slide 20Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Target costing starts with an ideal selling price
based on consumer value considerationsand then targets costs that will ensure that
the price is met
Other Internal and ExternalConsiderations
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Chapter 10 - slide 21Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Organizational considerations include:
Who should set the price
Who can influence the prices
Other Internal and ExternalConsiderations
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Chapter 10 - slide 22Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Before setting prices, the marketer must
understand the relationship between
price and demand for its products
Other Internal and ExternalConsiderations
The Market and Demand
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Chapter 10 - slide 23Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Pure competition
Monopolistic competition
Oligopolistic competition
Pure monopoly
Other Internal and ExternalConsideration
The Market and Demand
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Chapter 10 - slide 24Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
The demand curve shows the number of unitsthe market will buy in a given period atdifferent prices
Normally, demand and price are inverselyrelated
Higher price = lower demand For prestige (luxury) goods, higher price can
equal higher demand when consumersperceive higher prices as higher quality
Other Internal and ExternalConsiderations
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Chapter 10 - slide 25Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider When SettingPrices
Price elasticity of demand illustrates the response ofdemand to a change in price
Inelastic demand occurs when demand hardly changes when thereis a small change in price
Elastic demand occurs when demand changes greatly for a smallchange in price
Price elasticity of demand = % change in quantity demand
% change in price
Other Internal and ExternalConsiderations
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Chapter 10 - slide 26Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider When SettingPrices
Comparison of offering in terms ofcustomer value
Strength of competitors
Competition pricing strategies Customer price sensitivity
Other Internal and External ConsiderationsCompetitor's Strategies
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Chapter 10 - slide 27Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Economic conditions
Resellers response to price
Government
Social concerns
Other Internal and ExternalConsideration
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Chapter 10 - slide 28Copyright 2010 Pearson Education, Inc.
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall