What’s Happening? =9mIBKifOOQQ =9mIBKifOOQQ.
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Transcript of What’s Happening? =9mIBKifOOQQ =9mIBKifOOQQ.
What’s Happening?
http://www.youtube.com/watch?feature=player_embedded&v=9mIBKifOOQQ
Pricing Strategies
Chapter 11
Price Defined
The amount of money charged for a product or service that consumers exchange for the benefits of having or using the product or service. Most flexible element in marketing mix Major impact on store/product/service
image
What else is price?
Value Product power
to stimulateexchange
Barter Money-less
exchange
Other Terms: Rent Fee Donation Toll Honorariu
m Tuition
Price as a Marketing Mix variable
Price Competition versus Nonprice Competition
John Deere uses nonprice competition by emphasizing quality and workmanship
The Fundamentals of Pricing Strategy
1. Set pricing objectives2. Establish importance to target
market3. Understand demand4. Understand costs5. Determine strategy
$d
s TM
₤
П
Product objectives
Distribution objectives
Promotion objectives
Price objectives
Marketingobjectives
Marketingobjectives
Companyobjectives
Companyobjectives
Actual prices
Actual prices
Pricingstrategiesandpolicies
Pricingstrategiesandpolicies
Relating Pricing objectives to Marketing
objectives
Price Elasticity of Demand
Inelastic demand: when a percentage change in price causes a much smaller percentage change in demand Products that have few, if any substitutes Consumption is necessary Pricing strategy is to raise prices to earn
more profits
Price elasticity: a measure of the sensitivity of demand to changes in price
Elastic demand: when a percentage change in price causes a much larger percentage change in demand Products that have many substitutes Consumption is discretionary Pricing strategy normally to lower price to sell
more
Price Elasticity of Demand
Demand Curve
0
2
4
6
8
10
12
0 5 10 15 20 25 30 35 40
Quantity demanded
Pri
ce
P2
P11
Q21
Q21
Q1 Q1
Price Adjustments
Cash Discounts Trade Discounts Quantity Discounts Seasonal Discounts Chain Discounts Promotional
AllowancesSeasonal discounts are a common marketing strategy to encourage purchases
Pricing Strategies
Differential Pricing strategies Variable pricing Segment pricing Skimming Periodic discounting Random discounting
Competitive Pricing strategies Meeting the competition Below the competition Price leadership Following the leader Penetration pricing
Pricing Strategies
Product-line Pricing strategies
Captive pricing Leader pricing Bait pricing Price lining Price bundling Multiple-unit
pricing
Psychological and image Pricing strategies
Reference pricing Odd and even pricing Prestige pricing
Marketing Math
1.Markup on Selling Price:
= % markup on selling price
Amount added on----------------------------
Selling price
Establishing the Exact price
2. Markup on Cost:
= % markup on costAmount added on
----------------------------Cost
Manufacturer
Cost $20.0020% markup$ 5.00Selling price$25.00
Wholesaler
Cost $25.0015% markup$ 4.41Selling price$29.41
Retailer
Cost $29.4141% markup$20.59Selling price$50.00
Markup through a channel of distribution
