Pricing strategies(philip kotler)
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Pricing strategies(philip kotler)

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  • 19/11/10
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Transcript

  • 1. PRICING STRATEGIES (Philip Kotler) By: Shailja Pathak
  • 2. PRICE DISCOUNTS AND ALLOWANCES
    • Many companies give price discounts and adjust list prices in order to encourage early payments , volume purchases and off season purchasing. E.g. 2/10, net 30
    • Various Discounts are
    •  
    • PRICE DISCOUNTS
    • QUANTITY DISCOUNTS
    • FUNCTIONAL DISCOUNTS
    • SEASONAL DISCOUNTS
    • ALLOWANCES
    •  
  • 3.
    • Some product categories tend to self destruct themselves by always being on sale . Quick discounts often given by the salesperson to close a sale . This gives not a very favourable image of the company. Customers think that the company's list price is SOFT, and discounting becomes the norm.
    •  
    • THE DISCOUNT UNDERMINE THE VALUE PERCEPTION OF THE OFFERINGS.
  • 4. PROMOTIONAL PRICING
    •  
    • Companies use several pricing techniques to stimulate early purchase. Promotional pricing strategies are often ZERO-SUM GAME. If they work competitors copy them and they lose their effectiveness. If they do not work then they waste money that could have been put into other marketing tools .
    •  
  • 5. TYPES OF PROMOTIONAL PRICING
    • Loss-leader pricing e.g. rice
    • Special event pricing e.g. Back to school sales
    • Cash rebates e.g. By Auto manufacturers
    • Low-interest financing e.g. Air conditioners
    • Longer payment terms e.g. Mortgage banks
    • Warranties and service contracts e.g. Personal computers
    • Psychological discounting e.g. “Was rs. 359, now rs. 299”.
    •  
  • 6. DIFFERENTIATED PRICING
    •  
    • Companies often adjust their price to accommodate differences in customers, products, locations and so on. 
    • PRICE DISCRIMINATION: it occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs.
  • 7. DEGREES OF PRICE DISCRIMINATION
    •  
    • 1 st Degree: intensity of the DEMAND
    • 2 nd Degree: as per the VOLUME
    • 3 rd Degree: as per the CLASS of the buyer.
    •  
  • 8. TYPES OF 3 rd DEGREE PRICE DISCRIMINATION:-
    •  
    • Customer-segment pricing
    • Product-form pricing
    • Image pricing
    • Channel pricing
    • Location pricing
    • Time pricing
    •  
    •   **Airlines and Hospitality industries use yield management systems and yield pricing is by which they offer discounts.
  • 9.
    • The phenomenon of offering different prices to different customers and adjusting prices is EXPLODING.
    • Constant price variation may prove tricky where consumer relation ship are concerned.
  • 10. MARKETING MEMO
    • Pricing for rural markets.
    • A large proportion of rural consumers have a low and seasonal income.
    • KHATA SYSTEM
    • “ Break the bulk” e.g. tea, edible oil, wheat flour
    • “ Low-unit pricing”: small pack of products
    • e.g. Shampoos, soaps, “Chota-Coke”
  • 11. POSSIBLE TRAPS OF PRICE CUT STRATEGY
    • Low quality trap
    • Fragile-market-share trap
    • Shallow pockets trap
    • Price-war trap
  • 12. REASONS OF INITIATION PRICE INCREASES
    • Cost Inflation: prices are increased due to inflation in costs but proportionality of price to cost increase is higher.
    • Anticipatory Pricing: price hike is due to
    • Expected government pricing controls.
    • Over demand: increase of demand of product or service may encourage the
    • firm to increase the prices.
  • 13. INITIATING PRICE INCREASES
    • Delayed Quotation Pricing: in the long run, a company does not set the final price until the goods are being delivered.
    • Escalator Clauses: the present prices and the price increase before delivery are charged in total.
    • Unbundling: basic price are charged as well as the price of additional services and earlier promotional offers are being charged.
    • Reduction of discounts: earlier promotional strategies such as discounts or sales offers.
  • 14. ALTERNATIVE APPROACHES OF THE PRICE INCREASE
    • Product amount shrinkage
    • Substituting the expensive inputs by low ones.
    • Reducing or removing a certain product or service features.
    • Using less expensive packaging.
    • Reducing the number of sizes and models of product.
    • Creating new economy brands.
  • 15. Responding to Competitors’ Price Changes
    • The firm facing a competitor's price change must try to understand the competitor's intent and the likely duration of the change.
    • Strategy often depends on whether a firm is producing homogeneous or non-homogeneous products.
    • Market leaders frequently face aggressive price-cutting by smaller firms trying to build market share.
  • 16. Responding to Competitors’ Price Changes
    • The firm facing a competitor's price change must try to understand the competitor's intent and the likely duration of the change.
    • Strategy often depends on whether a firm is producing homogeneous or non-homogeneous products.
    • Market leaders frequently face aggressive price-cutting by smaller firms trying to build market share.
  • 17. Marketing Memo
    • Three Conditions For Determining the success of differentiation
    • Companies must not use differentiation tactics in isolation
    • Companies must be able to persuade consumers to pay for added benefits
    • Companies must bring costs and benefits in line.
    • SOME FEATURES ARE
    • 1.Design cool products
    • 2.Continually innovate
    • 3.Offer unique product mix
    • 4.Brand a community
    • 5.Sell experiences
  • 18. LEGAL ASPECTS AND ETHICS OF PRICING Controlling market in terms of product quality or advertising, by engaging in pricing practices that can unfairly reduce competition or harm consumers directly, through fraud and deception .
  • 19. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Legal Aspects and Ethics of Pricing Price fixing Price discrimination Predatory pricing Deceptive or illegal price advertising Legal Aspects and Ethics of Pricing
  • 20. DECEPTIVE OR ILLEGAL PRICE ADVERTISING
    • Puffery: e.g. Best deals in town
    • Deceptive Advertising: e.g.The lowest prices, guaranteed
    • Deceptive Reference Prices:
    • INFORMATIVE ADVERTISING
    • DECEPTIVE ADVERTISING
    • REGULAR PRICE: The price at which at least 50% of the sales have occurred.
  • 21. DECEPTIVE OR ILLEGAL PRICE ADVERTISING
    • LEADER PRICING: A legitimate attempt to build store traffic by pricing a regularly purchased item aggresively but still above the store’s cost.
    • BAIT AND SWITCH
  • 22. PREDATORY PRICING
    • Firm sets a very low price for one or more of its products to drive its competition out of business.
    • SHERMAN AND THE FEDERAL TRADE COMMISSION ACT (predatory pricing is illegal)
    • Oligopoly
    • Predation is difficult to prove because of two reasons .
  • 23. PRICE DISCRIMINATION
    • Firms sell same product to different resellers( wholesellers, distributors, retailers)at different prices.
    • CLAYTON ACT AND THE ROBINSON-PATMAN ACT ( Forms of price discrimination).
    • Quantity Discounts.
    • Ethical Dilemma.
  • 24. PRICE FIXING
  • 25. THANKS