Developing Pricing Strategies and Programs Marketing Management, 13 th ed 14

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-2 Chapter Questions How do consumers process and evaluate prices? How should a company set prices initially for products or services? How should a company adapt prices to meet varying circumstances and opportunities? When should a company initiate a price change? How should a company respond to a competitor’s price challenge?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-3 Consumer Psychology and Pricing Reference Prices: compare with internal or external reference price Price-quality inferences Price endings; Odd price

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-4 Table 14.2 Consumer Perceptions vs. Reality for Cars Overvalued Brands Land Rover Kia Volkswagen Volvo Mercedes Undervalued Brands Mercury Infiniti Buick Lincoln Chrysler

To accompany A Framework for Marketing Management, 2 nd Edition Slide 5 in Chapter 13 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Survival Maximize current profits Maximize market share Penetration strategy Market skimming Skimming strategy Product quality leaders Partial cost recovery

To accompany A Framework for Marketing Management, 2 nd Edition Slide 6 in Chapter 13 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Understand factors that affect price sensitivity Estimate demand curves Understand price elasticity of demand Elasticity Inelasticty

To accompany A Framework for Marketing Management, 2 nd Edition Slide 7 in Chapter 13 Marketing Strategies Product is more distinctive Buyers are less aware of substitutes Buyers cannot easily compare quality of substitutes The expenditure is small compared to the total cost The product is assumed to have more quality, prestige, or exclusiveness Buyers cannot store the product Conditions Under Which Consumers are Less Price Sensitive:

To accompany A Framework for Marketing Management, 2 nd Edition Slide 8 in Chapter 13 Marketing Strategies There are few or no substitutes Buyers do not readily notice the higher price Buyers are slow to change their buying habits and search for lower prices Buyers think higher prices are justified Conditions Under Which Demand is Less Elastic:

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-9 Figure 14.2 Inelastic and Elastic Demand

To accompany A Framework for Marketing Management, 2 nd Edition Slide 10 in Chapter 13 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Types of costs and levels of production must be considered Accumulated production leads to cost reduction via the experience curve Differentiated marketing offers create different cost levels

To accompany A Framework for Marketing Management, 2 nd Edition Slide 11 in Chapter 13 Setting the Price Key Pricing Terms: Fixed costs: do not vary directly with changes in level of production Variable costs: vary with production Total costs: sum of fixed and variable costs a given level of production Average cost: cost per unit at a given level of production

To accompany A Framework for Marketing Management, 2 nd Edition Slide 12 in Chapter 13 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Firms must analyze the competition with respect to: Costs Prices Possible price reactions Pricing decisions are also influenced by quality of offering relative to competition

To accompany A Framework for Marketing Management, 2 nd Edition Slide 13 in Chapter 13 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Price-setting begins with the three “C’s” Select method: Markup pricing Target-return pricing ROI Perceived-value pricing Value pricing (EDLP) High or low change daily Going-rate pricing according to competitors prices higher or lower Auction-type pricing Group pricing

To accompany A Framework for Marketing Management, 2 nd Edition Slide 14 in Chapter 13 Setting the Price Pricing Procedure Select pricing objective Determine demand Estimate costs Analyze competition Select pricing method Select final price Requires consideration of additional factors: Psychological pricing Gain-and-risk-sharing pricing Influence of other marketing mix variables Company pricing policies

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Auction-Type Pricing English auctions; put up an item bidder rise price Dutch auctions; auctioneer announce a high price for a product and slowly decrease price Sealed-bid auctions

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Price-Adaptation Strategies Geographical pricing Discounts/allowances Promotional pricing Differentiated pricing

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Price-Adaptation Strategies Countertrade Barter Compensation deal Buyback arrangement Offset: full cash but agree to spend apart of this cash to buy certain product Discounts/ Allowances Cash discount Quantity discount Functional discount Seasonal discount Allowance

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Promotional Pricing Tactics Loss-leader pricing; decrease leader price Special-event pricing Cash rebates; Low-interest financing: Automobile Longer payment terms Warranties and service contracts Psychological discounting

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Differentiated Pricing Customer-segment pricing Product-form pricing: size,volume price Image pricing: perfume different bottle and names Channel pricing: coca,restaurant, shops Location pricing: Time pricing: Seasons Yield pricing: Airline tickets early purchased

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Brand Leader Responses to Competitive Price Cuts Maintain price Maintain price and add value Reduce price Increase price and improve quality Launch a low-price fighter line

Designing and Managing Integrated Marketing Channels Marketing Management, 13 th ed 15

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Questions What is a marketing channel system and value network? What work do marketing channels perform? How should channels be designed? What decisions do companies face in managing their channels? How should companies integrate channels and manage channel conflict? What are the key issues with e-commerce?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall What is a Marketing Channel? A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Channels and Marketing Decisions A push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Categories of Buyers Habitual shoppers; buy from the same place High value deal seekers; they seek the lower price Variety-loving shoppers; evaluate the values added by channels and buy from the best one whatever price High-involvement shoppers; looking for good price and a good supports

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Types of Shoppers Service/quality customers seeking quality and services Price/value customers: wisely spending money wisely Affinity customers; who sought stores which is suited to them

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Channel Member Functions Gather information Develop and disseminate persuasive communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers’ payment of their bills Oversee actual transfer of ownership

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure 15.2 Marketing Channel Flows

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure 15.3 Consumer Marketing Channels

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure 15.3 Industrial Marketing Channels

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Designing a Marketing Channel System Analyze customer needs; lot size, delivery time,product variety and services Establish channel objectives: types of product Identify major channel alternatives: levels Evaluate major channel alternatives; economic criteria and control criteria

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Identifying Channel Alternatives Types of intermediaries Number of intermediaries Terms and responsibilities

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Number of Intermediaries Exclusive Selective Intensive

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Channel-Management Decisions Selecting channel members: its characteristics Training channel members &Motivating channel members Evaluating channel members Modifying channel members : periodically review and modify its channel design

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Channel Power Coercive : Threaten Reward: offer incentives Legitimate: implement the clues of contract Expert Referent : Image of manufacturer

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Channel Integration and Systems  Conventional marketing channel  Vertical marketing systems Corporate VMS: manufacturer owned distributor Administered VMS: who has more power Contractual VMS: Independent firms working together in contractual basis  Horizontal marketing systems  Multichannel systems

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall What is Channel Conflict? Channel conflict occurs when one member’s actions prevent another channel from achieving its goal. Types of channel conflict Vertical: between wholesaler and retailer Horizontal: Retailer and retailer Multichannel

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Causes of Channel Conflict Goal incompatibility: on pricing Unclear roles and rights: Differences in perception Intermediaries’ dependence on manufacturer

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Table 15.3 Strategies for Managing Channel Conflict Adoption of superordinate goals Exchange of employees Cooptation Diplomacy Mediation Arbitration Legal recourse

Designing and Managing Integrated Marketing Communications Marketing Management, 13 th ed 17

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Questions What is the role of marketing communications? How do marketing communications work? What are the major steps in developing effective communications? What is the communications mix and how should it be set? What is an integrated marketing communications program?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall What are Marketing Communications? Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Modes of Marketing Communications Advertising Sales promotion Events and experiences Public relations and publicity Direct marketing Interactive marketing Word-of-mouth marketing Personal selling

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Table 17.1 Communication Platforms Advertising Print and broadcast ads Packaging inserts Motion pictures Brochures and booklets Posters Billboards POP displays Logos Videotapes Sales Promotion Contests, games, sweepstakes Premiums Sampling Trade shows, exhibits Coupons Rebates Entertainment Continuity programs

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Table 17.1 Communication Platforms Events/ Experiences Sports Entertainment Festivals Factory tours Street activities Public Relations Speeches Seminars Annual reports Charitable donations Publications Community relations Lobbying Company magazine

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Table 17.1 Communication Platforms Personal Selling Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows Direct Marketing Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail Voice mail Websites

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Word-of-Mouth Marketing Person-to-person Chat rooms

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure17.2 Elements in the Communications Process

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Figure 17.3 Response Hierarchy Models

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Steps in Developing Effective Communications Identify target audience Determine objectives Design communications Select channels Establish budget Decide on media mix Measure results/manage IMC

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Communications Objectives Category need: electric care Brand awareness : increase the awareness to buy again Brand attitude : removing problem cleaning products Purchase intention: offers

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Designing the Communications Message strategy: Appeal them or idea helps in positioning product Creative strategy: the way that marketer translate their massages into specific communication a.Informal Appeal : focused into the attributes and benefits of products b.Transformational Appeal: focus on the kind of person use products Message source: Celebrities Global adaptation

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Issues Facing Global Adaptations Is the product restricted in some countries? Beer Are there restrictions on advertising the product to a specific target market? toys Can comparative ads be used? Can the same advertising be used in all country markets?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Select Communication Channels Personal channels Nonpersonal channels Integration of channels

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Personal Communications Channels Advocate channels: sales people Expert channels: independent expert Social channels: friends family members

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Nonpersonal Communication Channels Media Sales promotion Events and experiences Public relations

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Establish the Budget Affordable Percentage-of-sales Competitive parity Objective-and-task

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Characteristics of the Marketing Communications Mix Advertising Pervasiveness Amplified expressiveness Impersonality Sales Promotion Communication Incentive Invitation

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Characteristics of the Marketing Communications Mix Public Relations and Publicity High credibility Ability to catch buyers off guard Dramatization Events and Experiences Relevant Involving Implicit

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Characteristics of the Marketing Communications Mix Direct Marketing Customized Up-to-date Interactive Personal Selling Personal interaction Cultivation Response Word-of-Mouth Marketing Credible Personal Timely

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Factors in Setting Communications Mix Type of product market Buyer readiness stage Product life cycle stage