1. Chapter Eight Value-Based Pricing and Pricing Strategies

2. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-2 Value-Based Pricing and Pricing Strategies Value-based pricing Price-margin management Product life-cycle pricing strategies Pricing and profitability Price elasticity and profitability Price and break-even analysis Product line pricing

3. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-3 Value-Based Pricing Value-in-use pricing Perceived-value pricing Performance-based pricing

4. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-4 Value-In-Use Pricing Figure 8-2 Price Is Only the Tip of the Iceberg

5. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-5 Performance-Based Pricing Figure 8-7 Performance-Based Pricing Customer Preferences

6. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-6 Price-Margin Management Figure 8-10 McKinsey’s Waterfall

7. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-7 Product Life-Cycle Pricing Strategies Figure 8-12 Product Life-Cycle Pricing Strategies

8. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-8 Market-Based Pricing Strategies Skim pricing Value in-use pricing Perceived value pricing Segment pricing Strategic account pricing Plus-one pricing At what stages in the PLC should these strategies be employed?

9. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-9 Skim Pricing Favorable Conditions –Considerable differentiation –Quality-sensitive customers –Sustainable advantage –Few competitors –Few substitutes –Difficult competitor entry

10. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-10 Penetration Pricing Favorable Conditions –No/limited differentiation –Price-sensitive customers –No sustainable advantage –Many competitors –Many substitutes –Easy competitor entry

11. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-11 Price Elasticity % Change Volume % Change Price Price Elasticity =

12. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-12 Price Elasticity and Performance Figure 8-23 Price Elasticity — Volume, Sales, and Profitability

13. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-13 Price Elasticity Guidelines Figure 8-25 Guidelines for Estimating Price Elasticity

14. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-14 Price and Break-Even Analysis Break-Even Volume = Fixed Expenses Margin per Unit Break-Even Market Share = Break-Even Volume Market Demand

15. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-15 Product Line Pricing How could a marketer –Price substitute products? –Price complementary products?

16. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-16 Review Value-based pricing Price-margin management Product life-cycle pricing strategies Pricing and profitability Price elasticity and profitability Price and break-even analysis Product line pricing

17. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall8-17 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall