Transcript Pricing
Some Facets of Pricing Why your tank of gas leaves you less upset these days Is your cup of coffee a ‘rip off’? Can’t we find the best bargains at auctions? Why does my bag of chips have more air in it? What We Will Discuss Today Factors Affecting Prices Company factors Consumer factors Competitive factors Pricing Approaches Cost-based Consumer-based Competitor based ? Internal (Company) Factors 1 Goals Survival Current Profit Maximization Market-Share Leadership Product-Quality Leadership Marketing Mix Strategy pricing decisions must be coordinated with other marketing mix variables Internal Factors 2 Costs Variable Costs economies of scale experience curve Fixed Costs External (Demand) Factors Market Structure Pure competition: Price = Marginal costs Monopolistic competition: Price = Range Oligopolistic competition: Price based on competitors’ prices Pure monopoly: Price = ?? – Economics view – Reality Consumer Perceptions of Value What is an unFair Price? Consumer Perceptions of Price and Value Reference Price Assymetry of Losses and Gains ‘Fair’ and ‘Unfair’ Prices Pricing Perception Issues Odd versus even prices Is $1.99 cheaper than $2.00? Why is tax not included in the price? Pricing Approaches Cost-Based Pricing Cost-plus pricing Break even analysis Target profit pricing Buyer-Based Pricing Perceived value Competition-Based Pricing Competition Bidding Sealed bidding: chance of obtaining contract versus price Open bidding: auctions Competitive Reactions hostile cooperative nature of the market? Price/Quality Strategies Price Superb Value Strategy Premium Strategy High-value Strategy Overcharging Strategy Medium-value Strategy Good Value Strategy Rip-off Strategy False Economy Strategy Economy Strategy Quality A Geography Question Should we charge the same price to a customer in New York City as we do to a customer in Long Beach? Geographic Pricing 1 FOB (free-on-board)Origin Pricing goods are placed free on board carrier upon which title passes to customer Geographic Pricing 2 Uniform Delivered Pricing same price plus freight anywhere in U.S. Zone Pricing Discounts Why discount? How do we discount? Timing of Discounts Timing of Discounts seasonal discounts PLC discounting random discounting Types of Discounts 1 price discrimination customer segment product form: the expensive sheep bladder vitamin image pricing Loss Leader Discounts Types of Discounts 2 Psychological discounts: “was $359, now $299.” Coupons Cash Rebates A Typology of Customers and Strategies Price Sensitivity High Time Sensitivity Low High EDLP Low Coupons Focus on Convenience Focus on List Prices, Quality How to Increase Prices? The “List Price” How much to increase prices? gradually: all JNDs at once Decrease product size or quantity: the shrinking candy bar What We Discussed Today Factors Affecting Prices Company factors Consumer factors Competitive factors Pricing Approaches Cost-based Consumer-based Competitor based