András BauerMarketing Management1 Pricing Pricing is a complex exercise and price is more than a number The price continuum: from retail price to value-in-use Category and consumer involvment will define price perceptions in this continuum

András BauerMarketing Management2 Pricing Factors Marketing strategy Relative consumer value Costs Competition

András BauerMarketing Management3 Marketing Strategy Achieving perfect price discrimination Do not leave money on the table The marketing logic: how much are we willing to share?

András BauerMarketing Management4 Marketing strategy: segmentation The company can segment the market by the price sensitivity of consumers It can be based on consumer self selection, geography and time. Yield management based on timing Geogrpahic pricing

András BauerMarketing Management5 Customer value Perceived value and perceived cost Cost is not just a financial variable, it includes: out-of-packet costs, time spent, effort, emotional costs

András BauerMarketing Management6 COGS PRICE Perceived value Marketing efforts Substition prices Value-in-use pricing COMPANY Perceived cost CONSUMER

András BauerMarketing Management7 A simple price measure Perceived Value>Prices>Cost Do we leave money on the table? Price>Perceived Value>Cost Shall we lower price? Price>Cost>Perceived Value Need to rethink

András BauerMarketing Management8 Price Perception Reference prices serve as a starting point. Consumers form price references based on past experience and add future expectations.

András BauerMarketing Management9 The pricing context Decision frames serve as a context Context can define how much risk consumers are willing to take

András BauerMarketing Management10 LOSSES GAINSPERCEIVED VALUE + -

András BauerMarketing Management11 The role of cost: The NISSAN cost project NISSAN starts the car design process by establishing consumer needs and willingness to pay Costs are projected and design will follow

András BauerMarketing Management12 Lee Iacocca: “ We needed a car for four passengers. To achieve good performance, it had to be lightweight… And finally, it needed to be cheap. We designed it, that it should not cost more than $ 2500 …”

András BauerMarketing Management13

András BauerMarketing Management14 COST PRICE VALUE PRICE COST

András BauerMarketing Management15 Value-in-use Pricing in a B2B context In B2B context perceived value and cost is less subjective Value-in-use will be calculated based on purchasing price, start-up costs and postpurchase costs (maintenance and operations)

András BauerMarketing Management16 Competition Pricing strategy should be defined from a competitive perspective, as well In a monopoly the firm can manipulate price to find the right consumer reservation prices In competition price might become a decisive factor

András BauerMarketing Management17 Experience Curve and Competitive Positions Brand A Brand B

András BauerMarketing Management18 Pricing research Surveying willingness to pay Dollarmetric scales Field experiments Data analysis