1. MGT301 Principles of Marketing Lecture-27

2. Summary of Lecture-26

3. Price - Quality Strategies Premium Strategy Overcharging Strategy Overcharging Strategy Good-Value Strategy Good-Value Strategy Economy Strategy Economy Strategy Price HigherLower Higher Lower Quality

4. Price-Adjustment Strategies  Discount and Allowance Pricing  Segmented Pricing  Psychological Pricing  Promotional Pricing  Geographical Pricing  International Pricing

5. Today’s Topics Initiating and Responding to Price Changes

6. Initiating Price Increases Competitor Reactions To Price Changes Initiating Price Cuts Buyer Reactions to Price Changes Price Changes

8.  Initiating Price Cuts is Desirable When a Firm: –Has excess capacity –Faces falling market share due to price competition –Desires to be a market share leader

9.  Price Increases are Desirable: –If a firm can increase profit, faces cost inflation, or faces greater demand than can be supplied.  Alternatives to Increasing Price –Reducing product size, using less expensive materials, unbundling the product.

10.  Buyer reactions to price changes must be considered.  Competitors are more likely to react to price changes under certain conditions. –Product is uniform –Buyers are well informed

11. Responding to price changes

12. Hold Current Price; Continue to Monitor Competitor’s Price. Hold Current Price; Continue to Monitor Competitor’s Price. Reduce Price Raise Perceived Quality Raise Perceived Quality Improve Quality & Increase Price Improve Quality & Increase Price Launch Low-Price “Fighting Brand” Launch Low-Price “Fighting Brand” Has Competitor Cut Price? Has Competitor Cut Price? Will Lower Price Negatively Affect Our Market Share & Profits? Will Lower Price Negatively Affect Our Market Share & Profits? Can/ Should Effective Action be Taken? Can/ Should Effective Action be Taken? Yes No

13.  Respond To Price Changes Only If… –Market share / profits will be negatively affected if nothing is changed.

14. Four strategies  Reduce price  Raise perceived quality  Improve quality and increase price  Launch a low price fighting brand

15. End of Price part…..

16. Review 2nd P (Price)

18. What is Price? Price Has Many Names  Rent  Fee  Rate  Commission  Tuition  Fare  Toll  Premium  Bribe  Salary  Wage  Interest  Tax

19. Definition  Price –The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

20. Internal Factors Pricing Decisions Pricing Decisions External Factors Target Market Positioning Objectives Factors Affecting Price Decisions

21. Marketing Objectives Marketing-Mix Strategy Costs Organizational Considerations Internal Factors Affecting Pricing Decisions

22. External factors affecting Pricing decisions

23. Market and Demand Competitors’ Costs, Prices, and Offers0 Other External Factors Economic Conditions Reseller Needs Government Actions Social Concerns Internal Factors Affecting Pricing Decisions

24. Price Elasticity of Demand  How quantity demanded responds to price changes

25. Price Quantity Demanded per Period A. Inelastic Demand - Demand Hardly Changes With a Small Change in Price. P2P2 P1P1 Q1Q1 Q2Q2 Price Quantity Demanded per Period P’ 2 P’ 1 Q1Q1 Q2Q2 B. Elastic Demand - Demand Changes Greatly With a Small Change in Price.

26. General Pricing Approaches  Cost-based Pricing  Value-based Pricing  Competition-based Pricing

27. Rupees (in thousands) 1200 1000 800 600 400 200 0 Total cost Fixed cost Target profit Total revenue 1020304050 Sales volume in units (thousands) Break-even point Break-even…for Determining Target Return Price and Break- even Volume

28. New Product Pricing Strategies  Market Skimming  Market Penetration

29. Product Mix Pricing Strategies

30. Product Line Pricing Optional-Product Pricing Captive-Product Pricing By-Product Pricing Product-Bundle Pricing Product Mix Pricing Strategies Product Mix Pricing Strategies

31. Premium Strategy Overcharging Strategy Overcharging Strategy Good-Value Strategy Good-Value Strategy Economy Strategy Economy Strategy Price HigherLower Higher Lower Quality Price - Quality Strategies

32. Price-Adjustment Strategies  Discount and Allowance Pricing  Segmented Pricing  Psychological Pricing  Promotional Pricing  Geographical Pricing  International Pricing

33. Initiating Price Increases Competitor Reactions To Price Changes Initiating Price Cuts Buyer Reactions to Price Changes Price Changes

34. Responding to price changes

35. Hold Current Price; Continue to Monitor Competitor’s Price. Hold Current Price; Continue to Monitor Competitor’s Price. Reduce Price Raise Perceived Quality Raise Perceived Quality Improve Quality & Increase Price Improve Quality & Increase Price Launch Low-Price “Fighting Brand” Launch Low-Price “Fighting Brand” Has Competitor Cut Price? Has Competitor Cut Price? Will Lower Price Negatively Affect Our Market Share & Profits? Will Lower Price Negatively Affect Our Market Share & Profits? Can/ Should Effective Action be Taken? Can/ Should Effective Action be Taken? Yes No

36. Enough for Pricing...

37. Summary

38. Next….

39. MGT301 Principles of Marketing Lecture-27