1. The Marketing Mix
Price Strategies

2. The Importance of Pricing
Pricing is one of the most vital decisions made by management
Price too high and you lose the sale
Price too low and you can’t make money
Two fundamental ways to grow revenue
raise your price
increase the quantity you sell
Price is the easiest of all marketing variables to influence but among the most complex decisions to make
price changes may be implemented immediately

3. Conceptual Orientation to Pricing
Initial pricing discretion
Corporate objectives and regulatory constraints
Competitive factors
Final pricing discretion
(Price ceiling)
Demand factors
(Value to buyers)
(Price floor)
Direct variable costs
Nagle 1999

4. Nine Price-Quality Strategies

5. Setting the Price

6. Setting the Price Pricing Procedure Survival Maximize current profits
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

7. 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

8. Price Sensitivity Situations That Increase Price Sensitivity
Availability of product substitutes
Higher total expenditure
Noticeable differences
Easy price comparison
Situations That Decrease Price Sensitivity
Real or perceived necessities
Lack of product substitutes
Complementary products
Product differentiation
Perceived product benefits
Situational influences

9. Price Elasticity of Demand

10. 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

11. Setting the Price Pricing Procedure Select method: Markup pricing
Select pricing objective
Determine demand
Estimate costs
Analyze competition
Select pricing method
Select final price
Select method:
Markup pricing
Target-return pricing
Perceived-value pricing
Value pricing
EDLP, Hi-Lo
Going-rate pricing
Auction-type pricing
Group pricing

12. 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
Impact of price on other parties

13. Price Discounts and Allowances Promotional Allowances
Adapting the Price
Price Discounts and Allowances
Cash Discounts
Functional Discounts
Quantity Discounts
Seasonal Discounts
Trade-in Allowances
Promotional Allowances

14. Promotional Pricing Tactics
Adapting the Price
Loss-Leader Pricing
Special Event Pricing
Promotional Pricing Tactics
Low Interest Financing
Cash Rebates
Psychological Discounting
Warranties and Service Contracts
Longer Payment Terms

15. Discriminatory Pricing Tactics Customer Segment Pricing
Adapting the Price
Discriminatory Pricing Tactics
Time Pricing
Image Pricing
Channel Pricing
Location Pricing
Product-Form Pricing
Customer Segment Pricing

16. Adapting the Price Price discrimination works when:
Market segments show different intensities of demand
Consumers in lower-price segments can not resell to higher-price segments
Competitors can not undersell the firm in higher-price segments
Cost of segmenting and policing the market does not exceed extra revenue

17. Adapting the Price Product-Mix Pricing Tactics Two-Part Pricing
By-Product Pricing
Product-Line Pricing
Product-Bundle Pricing
Captive-Product Pricing
Optional-Feature Pricing

18. Legal and Ethical Issues in Pricing
Price Discrimination
Price Fixing
Predatory Pricing
Deceptive Pricing