BUSI 406 PRINCIPLES OF MARKETING: PRICING OBJECTIVES AND POLICIES

Today’s Agenda Answer any questions Case assignment due Wednesday, November 12: Simply Pure H2O4U Team Project Presentations begin Monday, November 17 – 9,8,7 Printed Copy of Team Class Project Executive Summaries and PPTs due Monday, November 17 3 to 5 page (plus Exhibits) text Executive Summary for your client that follows marketing strategy plan model 8 to 10 slide PPT deck you will use for 10 minute class presentation Discuss material you read in Chapter 16

Strategy Planning and Pricing Objectives and Policies CH 17: Price Setting in the Business World CH 16: Pricing Objectives and Policies Pricing objectives Pricing policies Pricing and customer value Legal issues and pricing policies

Pricing “If effective product, promotion, and distribution strategies sow the seeds of success, effective pricing is the harvest.” (Tom Nagle)  Product strategy creates value for the customer.  Promotion strategy communicates value of offerings to the customer  Distribution policy delivers value to the customer  Pricing strategy is the only one of the 4P’s devoted to capturing the value of its offerings. (The moment of truth!)

Price Exchanged for Something of Value – View of Consumer or User Exchange Something of Value Product Physical good Service Assurance of quality Repair facilities Packaging Credit Warranty Place of delivery or when available

Price Exchanged for Something of Value – View of Channel Members Exchange Price List Price Less: discounts Quantity Seasonal Cash Trade or functional Temporary “deals” Less: allowances Damaged goods Advertising Push money Stocking fees Plus: transportation, taxes, tariffs, and costs of handling or disposal Something of Value Product Branded—well known Guaranteed & warranted Service/repair facilities Convenient packaging Place Availability/when/where Promotion Promotion aimed at end- user customers Price Price-level guarantee Sufficient margin & inventory turns to allow for profit

Pricing Objectives Pricing objectives Pricing objectives Profit oriented Target return Maximize profits

Pricing Objectives Pricing objectives Pricing objectives Profit oriented Target return Maximize profits Sales oriented Dollar or unit sales growth Dollar or unit sales growth Growth in market share Growth in market share

Pricing Objectives Profit oriented Target return Maximize profits Sales oriented Dollar or unit sales growth Dollar or unit sales growth Growth in market share Growth in market share Status quo oriented Status quo oriented Meeting competition Meeting competition Nonprice competition Nonprice competition Pricing objectives Pricing objectives

One-Price vs. Flexible-Price Policy? OR One-Price Policy The same for everyone Frequently purchased items Convenient Low cost Maintains goodwill Flexible Price Policy Different customers, different prices Databases make it easier Salespeople can adjust prices Too much cutting can hurt profits

Skimming vs. Penetration Tesla? iPhone 6?

Skimming vs. Penetration  When to use skimming/skim pricing  Inelastic demand  Product protected by patents/difficult to duplicate  Short term profit objective  Price is seen as surrogate for quality  When to use penetration pricing  Elastic demand  Economies of scale effects  Desire to gain pioneering advantage

Discount Policies: Reductions From List Prices Trade Cash Seasonal Quantity From List Price From List Price Sale

Allowance Policies: Reductions Off List Prices  Advertising allowance Price reductions given to firms in the channel to promote the supplier’s products locally  Stocking allowance Also called slotting allowances and are given to middlemen to get attention and shelf space for a product  Push money allowance Used as incentives for their salesclerks to aggressively push the targeted items  Trade-in allowance Customer receives a price reduction for used products when similar new products are bought

Coupon Distribution

List Price May Depend On Geographic Pricing Policies  FOB pricing The seller pays to have the product loaded on a transportation vehicle at which time the title is transferred to the buyer, who pays shipping and is responsible for the product at that point.  Zone pricing An average freight charge is given to all customers in the same specified geographic area.  Uniform delivered pricing Charging one price to all buyers  Freight-absorption pricing Company pays the cost of shipping without changing the price in order to get the sale.

Legality of Pricing Policies Phony List Prices Phony List Prices Dumping Unfair Trade Practice Acts Unfair Trade Practice Acts Key Issues Price Fixing

Price Discrimination Meeting Competition Meeting Competition Cost Differences Cost Differences “Like Grade & Quality” “Like Grade & Quality” Robinson- Patman Act Robinson- Patman Act Key Issues “Proportionately Equal” Basis “Proportionately Equal” Basis

Today’s Take-Aways  A successful pricing strategy allows companies to cover their costs and make a profit.  Marketing objectives should guide pricing objectives.  List prices are not the whole story - discounts, allowances and delivery policies alter the final amount paid by the customer.  Price should be viewed from the perspective of the consumer.

For next class… Read Chapter 17 Case assignment due Wednesday, November 12: Simply Pure H2O4U Team Project Presentations begin Monday, November 17 – 9,8,7 Printed Copy of Team Class Project Executive Summaries and PPTs due Monday, November 17 3 to 5 page (plus Exhibits) text Executive Summary for your client that follows marketing strategy plan model 8 to 10 slide PPT deck you will use for 10 minute class presentation