1. 1 TOP 10 Learning Concepts Ch 14: Developing Pricing Strategies and Programs Bohong Li April 8 ,2011

2. 2 Outline Consumer Psychology and Pricing Steps in Setting Price Price-Adaptation Strategies

3. 3 Concept 1:Consumer Psychology and Pricing Reference Prices Price-quality inferences Price endings Price cues From Philip Kotler’s, Marketing Management, 13th Edition

4. 4 Concept 1:Reference Price is the that consumers expect or deem to be reasonable for a certain type of product. The price was used to be??? Frame of reference The way the price is presented Memory of past prices

5. 5 Concept 1:Price-quality inferences some consumers believe that price and quality are highly correlated whereas other consumers believe that price and quality are not highly correlated.

6. 6 Concept 1:Price endings: price ending is a marketing practice based on the theory that certain prices have a psychological impact. Firms that are using high prices to signal quality are more likely to set those prices at round numbers (9-ending prices)

7. 7 Concept 1:Price cues A price cue is defined as any marketing tactic used to persuade customers that prices offer good value compared to competitors’ prices, past prices or future prices.

8. 8 Concept 2:Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price

9. 9 Concept 3:Step 1: Selecting the Pricing Objective Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership

10. 10 Survival:if the companies are plagued with overcapacity, intense competition, or changing consumer wants. Maximum current profit: if the companies estimate the demand and costs associated with alternative prices Maximum market share: if they believe that a higher sales volume will lead to lower unites costs and higher long-run profit. Concept 3:Step 1: Selecting the Pricing Objective

11. 11 Maximum market skimming: companies unveiling a new technology favor setting high prices, and slowly drop price over time. Product-quality leadership: products or services characterized by high levels of perceived quality, taste, and status with a price just high enough not to be out of consumers’ reach. Concept 3:Step 1: Selecting the Pricing Objective

12. Concept 4:Step 2: Determining Demand Price Sensitivity Estimating Demand Curves Price Elasticity of Demand From Philip Kotler’s, Marketing Management, 13th Edition 12

13. Concept 5:Step 3: Estimating Costs Types of Costs Accumulated Production Activity-Based Cost Accounting Target Costing From Philip Kotler’s, Marketing Management, 13th Edition 13

14. 14 Fixed costs Variable costs Total costs Average cost Cost at different levels of production Concept 5:Step 3: Estimating Costs From Philip Kotler’s, Marketing Management, 13th Edition

15. Concept 6:Step 5: Selecting a Pricing Method Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing From Philip Kotler’s, Marketing Management, 13th Edition 15

16. 16 Impact of other marketing activities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties Concept 7:Step 6: Selecting the Final Price From Philip Kotler’s, Marketing Management, 13th Edition

18. Quantity discount

19. Functional discount

20. Seasonal discount

21. AllowanceFrom Philip Kotler’s, Marketing Management, 13th Edition 17

22. 18 Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting Concept 9:Price-Adaption Strategy 3 : Promotional Pricing From Philip Kotler’s, Marketing Management, 13th Edition

23. 19 Customer-segment pricing Product-form pricing Channel pricing Location pricing Time pricing Yield pricing Concept 10:Price-Adaption Strategy 4 : Differentiated Pricing From Philip Kotler’s, Marketing Management, 13th Edition

24. 20 Differentiated pricing

25. 21 Differentiated pricing

26. 22 Summary Consumer Psychology and Pricing Steps in Setting Price Price-Adaptation Strategies

27. 23 TOP 2 Learning Concepts Ch 14: Developing Pricing Strategies and Programs Bohong Li April 1 ,2011