Transcript Price
Principles of Marketing Lecture-26 Summary of Lecture-25 Setting Pricing Policy General Pricing Approaches Cost-based Pricing Value-based Pricing Competition-based Pricing New Product Pricing Strategies •Market Skimming •Market Penetration Product Mix Pricing Strategies Product Line Pricing Optional-Product Pricing Product Mix Pricing Strategies Captive-Product Pricing By-Product Pricing Product-Bundle Pricing Today’s Topics Price Often the only marketing mix variable allowing for immediate competitive response Important part of product positioning Long term effects of pricing decisions--your decisions may come back to haunt you! Price - Quality Strategies Price Higher Quality Higher Lower Lower Premium Strategy Good-Value Strategy Overcharging Strategy Economy Strategy Price-Adjustment Strategies Discount and Allowance Pricing Segmented Pricing Psychological Promotional Pricing Geographical International Pricing Pricing Pricing Discount and Allowance Pricing Adjusting Basic Price to Reward Customers For Certain Responses Cash Discount Seasonal Discount Quantity Discount Trade-In Allowance Functional Discount Promotional Allowance Discounts Quantity Discount Pricing Quantity discounts reward bigger buyers Quantity Seasonal Discount Pricing Seasonal discounts encourage purchases earlier than demand Quantity Seasonal Discount Pricing Cash Cash discounts encourage customers to pay invoices earlier Quantity Seasonal Discount Pricing Trade discounts reflect jobs done by middlemen … and usually are pretty much standardized by expected margins Cash Trade Quantity Seasonal Discount Pricing Sale Cash Temporary price cuts to shift demand (rebates, trade deals, etc.) Trade Allowances Advertising Allowance Common Kinds of Allowances Advertising or promotion allowance is a reduction from amount due to compensate middleman for promotion expenses, often as a percentage of total sales Advertising Allowance Stocking Allowance Common Kinds of Allowances Stocking allowances (also known as slotting fees) are payments to wholesalers or retailers to stock unproven new products (I.e., “rent” for shelf space) Advertising Allowance Stocking Allowance Common Kinds of Allowances Trade-in allowances are relatively uncommon but in some business markets are critical Brokers often develop to get rid of used products Trade-In Allowance Advertising Allowance Stocking Allowance Common Kinds of Allowances Push Money Allowance Trade-In Allowance Push money is an allowance that is usually passed on to salespeople for pushing a particular product Segmented Pricing Selling Products At Different Prices Even Though There is No Difference in Cost Customer - Segment Location Pricing Product - Form Time Pricing Psychological Pricing Considers the psychology of prices and not simply the economics. Customers use price less when they can judge quality of a product. Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a product. Odd/Even Pricing--Does It have an Impact? Theory: $3.00 is rounded to $3.00 while $2.99 is rounded to “$2.00 plus change” Reality: Studies in U.S. have found some impact; no impact found in Germany Note that odd pricing may signal receiving a bargain, which may or may not be compatible with the desired product image Promotional Pricing Loss Leaders Temporarily Pricing Products Below List Price to Increase ShortTerm Sales Through Special-Event Pricing Cash Rebates Low-Interest Financing Longer Warranties Free Merchandise Discounts Geographical Pricing F.O.B. Common Geographic Pricing Policies F.O.B. means “free on board” (e.g., at some place such as a factory, warehouse, destination,etc.) Customer pay the freight and take risk of shipping product F.O.B. Zone Common Geographic Pricing Policies Zone pricing sets some “average” price that is used anywhere within a specific geographic zone (I.e., may be a whole country or region), but prices differ between zones F.O.B. Zone Common Geographic Pricing Policies Uniform Delivered Making an average freight charge to all customers, usually used when transportation costs are low or for simplicity. F.O.B. Zone Common Geographic Pricing Policies Uniform Delivered Freight Absorption Seller absorbs all or part of the freight costs to meet the prices of the nearest competitor … amounts to price cutting to appeal to distant customers. Basing-point pricing A geographical pricing strategy in which the seller designate some city as a basing point and charges all customers the freight cost from that city to the customers. FOB Origin Uniform Delivered Pricing Tactics Based on Geography Zone Pricing Freight-Absorption Basing-Point International Pricing Adjusting prices for customers in different counties. Price depends on costs, consumers, economic conditions, competitive situations, & other factors. Enough for today. . . Summary Price - Quality Strategies Price Higher Quality Higher Lower Lower Premium Strategy Good-Value Strategy Overcharging Strategy Economy Strategy Price-Adjustment Strategies Discount and Allowance Pricing Segmented Pricing Psychological Promotional Pricing Geographical International Pricing Pricing Pricing Next…. Price Changes Principles of Marketing Lecture-26