PRICING OBJECTIVES <ul><li>MAXIMIZE PROFIT </li></ul><ul><li>MAXIMIZE REVENUE/ MARKET SHARE </li></ul>
PRICE SKIMMING <ul><li>HIGH INTRODUCTORY PRICE; SLOW PRICE DECLINE </li></ul><ul><li>CONSUMER RESERVATION PRICES DIFFER SI...
PENETRATION PRICING <ul><li>Low price </li></ul><ul><li>High PRICE SENSITIVE MARKET </li></ul><ul><li>SIGNIFICANT COST DEC...
FACTORS AFFECTING PRICE SENSITIVITY <ul><li>UNIQUE VALUE EFFECT (MAY TAG WASHERS COST $100 MORE) </li></ul><ul><li>SUBSTIT...
CONTINUED <ul><li>SHARED COST EFFECT (HEALTH CARE, TRAVEL EXPENSES)  do you pay or your company does? </li></ul><ul><l...
PERCEIVED/ ECONOMIC VALUE PRICING <ul><li>WHAT IS THE PERCEIVED VALUE FOR THE PRODUCT </li></ul><ul><li>WHAT IS THE DIF...
Example <ul><li>Bulldozer </li></ul><ul><ul><li>10,000 hours use </li></ul></ul><ul><li>Caterpillar is a dominant player a...
Closer Examination <ul><li>SAVINGS occur in ALL costs-benefits to figure out economic value </li></ul><ul><li>Savings on p...
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pricing marketing mgmt

pricing marketing mgmt
Published on: Mar 4, 2016
Published in: Business      Sports      
Source: www.slideshare.net


Transcripts - pricing marketing mgmt

  • 1. PRICING OBJECTIVES <ul><li>MAXIMIZE PROFIT </li></ul><ul><li>MAXIMIZE REVENUE/ MARKET SHARE </li></ul>
  • 2. PRICE SKIMMING <ul><li>HIGH INTRODUCTORY PRICE; SLOW PRICE DECLINE </li></ul><ul><li>CONSUMER RESERVATION PRICES DIFFER SIGNIFICANTLY </li></ul><ul><li>CONSUMERS ARE IMPATIENT </li></ul><ul><li>HIGH PRICE SIGNALS HIGH QUALITY </li></ul><ul><li>NO SIGNIFICANT ECONOMIES OF SCALE </li></ul><ul><li>NO SIGNIFICANT LEARNING CURVE DECLINE </li></ul><ul><li>NO SERIOUS ENTRY THREAT </li></ul>
  • 3. PENETRATION PRICING <ul><li>Low price </li></ul><ul><li>High PRICE SENSITIVE MARKET </li></ul><ul><li>SIGNIFICANT COST DECLINES DUE TO LEARNING </li></ul><ul><li>SCALE ECONOMIES </li></ul><ul><li>SIGNIFICANT ENTRY THREAT/Barriers </li></ul>
  • 4. FACTORS AFFECTING PRICE SENSITIVITY <ul><li>UNIQUE VALUE EFFECT (MAY TAG WASHERS COST $100 MORE) </li></ul><ul><li>SUBSTITUTE AWARENESS EFFECT (AVON COSMETICS) </li></ul><ul><li>DIFFICULT COMPARISON EFFECT (HIGH END ELECTRONICS; HOMEDEPOT PRODUCT) </li></ul><ul><li>TOTAL EXPENDITURE EFFECT (LARGE FAMILIES ARE PRICE SENSITIVE TO GROCERIES) </li></ul><ul><li>END-BENEFIT EFFECT (CAR BUYERS BUY EXPENSIVE STEREOS AT THE TIME OF PURCHASE; GROWING PRICE SENSITIVITY OF SOFTWARE)  Marginal cost of additional accessory </li></ul>
  • 5. CONTINUED <ul><li>SHARED COST EFFECT (HEALTH CARE, TRAVEL EXPENSES)  do you pay or your company does? </li></ul><ul><li>SUNK INVESTMENT EFFECT (MINIMAL DECREASE IN GASOLINE CONSUMPTION AFTER THE 1974 OIL PRICE SHOCK) </li></ul><ul><li>PRICE - QUALITY EFFECT (INEXPERIENCED WINE BUYERS, flowers) </li></ul><ul><li>INVENTROY EFFECT (QUANTITY LIMITS ON REPEAT ITEMS)  buyers only buy on promotion </li></ul>
  • 6. PERCEIVED/ ECONOMIC VALUE PRICING <ul><li>WHAT IS THE PERCEIVED VALUE FOR THE PRODUCT </li></ul><ul><li>WHAT IS THE DIFFERENTIATED VALUE FROM THE CLOSEST COMPETITOR </li></ul><ul><li>DIFFICULT TO ESTIMATE IN CONSUMER PRODUCTS </li></ul><ul><li>EASIER TO ESTIMATE IN INDUSTRIAL PRODUCTS </li></ul><ul><li>BASIS FOR TARGET PRICING - START WITH VALUE PRICE AND DECIDE SPLIT: variable cost is min, perceived value is max </li></ul>
  • 7. Example <ul><li>Bulldozer </li></ul><ul><ul><li>10,000 hours use </li></ul></ul><ul><li>Caterpillar is a dominant player at the high end bulldozer: Price 60K </li></ul><ul><li>John Deere: New Product </li></ul><ul><ul><li>12% More Productive </li></ul></ul><ul><ul><li>Economic value: 67K? </li></ul></ul>
  • 8. Closer Examination <ul><li>SAVINGS occur in ALL costs-benefits to figure out economic value </li></ul><ul><li>Savings on parts, fuel </li></ul><ul><li>Parts, fuel (1.25 times price approx.) </li></ul><ul><li>Labor ($25/hr) </li></ul><ul><li>Total cost: 385,000 </li></ul><ul><li>Potential savings: 46,000 </li></ul><ul><li>Economic Value – $106,000! </li></ul><ul><li>What is the target price? </li></ul>

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