Principles of Mktg - Pricing Strategy.pptx

Price, Pricing Strategy

1. What is a Price? - is the amount of money charged for a product or a service. More broadly, price is the sum of all the values that customers give up to gain the benefits of having or using a product or service.

2. PRICE DETERMINANTS There are: - 3 Internal Factors - 3 External Factors

3. The 3 Internal Factors 1. Marketing Strategy 2. Objectives 3. Marketing Mix

4. 1. Marketing Strategy The company must settle on its overall marketing strategy for the product or service. If the company has chosen its target market and positioning, then its marketing mix strategy, including price, will be reasonably uncomplicated.

5. 2. Objectives A company can set low prices to avoid competition or set costs at competitors' levels to steady the market.

6. 3. Marketing Mix Pricing choices must be harmonized with product design, distribution, and promotion decisions to structure a reliable and valuable integrated marketing program.

7. External Factors 1. Nature of the market – Before setting prices, the marketer must know the relationship between price and demand for the company's product.

8. 2. Demand Buyers are less price-conscious when the product they are buying is high in quality, prestige, or exclusiveness. Or substitute products are hard to find or when they cannot easily compare the quality of substitutes.

9. 3. Economy Economic factors like a boom or recession, inflation, and interest rates affect pricing decisions.

10. Demand-Oriented Approaches of Pricing 1. Skimming 2. Penetration 3. Prestige 4. Odd-even 5. Bundle

11. Cost-Oriented Approaches 1. Cost-plus Pricing 2. Break-even Pricing 3. Experience Curve Pricing

12. The Differences Between Demand-Oriented versus Cost-Oriented Approaches Demand-Oriented - consider the underlying expected customer tastes & preferences (demand) more heavily than cost, profit, and competition. Cost-Oriented - the cost side of the pricing is given emphasis, not the demand side.

13. 1. Skimming

14. Price Skimming Price skimming is a pricing strategy. A marketer sets a relatively high price for a product or service first, then lowers the cost over time .

15. 2. Penetration

16. Penetration Pricing is the pricing technique of setting a relatively low initial entry price , often lower than the eventual market price , to attract new customers.

17. 3. Prestige

18. Prestige Pricing is a physiological pricing strategy that sets luxury product prices to the customers who associate higher prices with superior quality.

19. 4. Odd-even

20. Odd-even Pricing A type of psychological pricing where the price is set based on customers' perception of significant difference in cost between priced at a whole number value slightly below the whole number. Example: A t-shirt priced at P199 instead of P200

21. 5. Bundle

22. Bundle Pricing - companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately.

23. Cost-Oriented Approaches – 1. Cost-plus Pricing

24. Cost-plus Pricing The firm determines the level of sales needed to cover all the relevant fixed and variable costs.

25. 2. Break-even Pricing

26. Break-even Pricing The firm determines the level of sales needed to cover all the relevant fixed and variable costs.

27. Experience Curve Pricing

28. Experience Curve Pricing The most experienced producer benefits from having lower costs than its competitors.