Kotler Keller

Marketing Management 14e

Phillip

Kevin Lane

Developing Pricing Strategies and Programs

Discussion Questions
1. How do consumers process and evaluate prices?

2. How should a company set prices initially for products or services?

3. How should a company adapt prices to meet varying circumstances and opportunities? 4. When should a company initiate a price change?

5. How should a company respond to a competitors price change?

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Marketing Mix
Revenue Producer

Cost

Product

Price

Cost

Place

Promotion

Cost

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Pricing
Forms

Price
Components

Functions

$31.50

$33.50

Bargaining
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Changing Price Environment

Buyers
Ill pay $235.00 Instant Price Comparisons

Get Products Free Name Your Own Price

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Changing Price Environment

Sellers
$29.99 $19.99 $24.99

Selective Pricing

Negotiate Prices
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Monitor Customers
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How Companies Price

Product-line Managers (w/guidance)

Small Business Owner

Pricing Department
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Consumer Psychology and Pricing

Price-Quality Inferences

Reference Prices

99 $1.
Price Endings
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A Black T-Shirt

Armani - $275

Gap - $14.90

H&M - $7.90
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Setting the Price

6 5 3 1 Select Final Price Price Method

4 Competitor Analysis Estimate Costs 2 Determine Demand Pricing Objective

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Selecting the Pricing Objective

Survival Maximum Current Profit Maximum Market Share Maximum Market Skimming Product-Quality Leadership Other Objectives

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Determining Demand
Price sensitivity Estimating demand curves Price Elasticity of Demand

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Inelastic and Elastic Demand

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Estimating Costs
Demand

Price Ceiling Price

Profit Costs Price Floor

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Estimating Costs
Types of costs

Fixed Costs (overhead)

Variable Costs

Total Costs

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Costs at Varying Levels of Production

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Estimating Costs
Accumulated Production
Experience Curve
(Learning Curve)

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Estimating Costs
Target Costing

Market research
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Design engineers
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The Experience Curve

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Analyzing Competitors Offers

Price Costs Reaction

Worth to Customer
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Selecting a Pricing Method

Pricing Methods Markup Target-return Perceived-Value Value Going-rate Auction-type

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High Price
(No possible demand at this price)

Ceiling price

Three Cs Model for Price Setting

Customers assessment of unique product features Orienting point Competitors prices and prices of substitutes Costs Floor Price

Low Price
(No possible profit at this price)
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Markup Pricing
Variable cost per toaster $10

Fixed costs
Expected unit sales

$300,000
50,000

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Target-Return Pricing

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Target-Return Pricing

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Perceived-Value Pricing
Customers perceived-value
Performance $$$ Warranty $ Customer support $ Reputation $$

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Value Pricing
EDLP
THOUSANDS OF

Level of Quality

LOW PRICES EVERY DAY

throughout the store

P1

C1

P2 C2

High

Pricing
Low
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Going-Rate Pricing

Commodities

Follow the Leader

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Auction Pricing
English auction
(ascending bids)

Dutch auction
(descending bids)

Sealed-bid auction
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Selecting the Final Price

Impact on others

Brand Quality

Pricing Policies Gain-and-risk-sharing

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Adapting the Price

Geographic Pricing

Price Discounts and Allowances

Differentiated Pricing

Promotional Pricing
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Dealing with Price Changes

Raising Prices

Cutting Prices

Competitor Moves
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