1. MARKETING MANAGEMENT 12 th edition 14 Developing Pricing Strategies and Programs KotlerKeller

2. 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?

3. 14-3 Whirlpool’s Duet combo is nearly four times the price of comparable models

4. 14-4 Synonyms for Price Rent Tuition Fee Fare Rate Toll Premium Honorarium Special assessment Bribe Dues Salary Commission Wage Tax

5. 14-5 Common Pricing Mistakes Determine costs and take traditional industry margins Failure to revise price to capitalize on market changes Setting price independently of the rest of the marketing mix Failure to vary price by product item, market segment, distribution channels, and purchase occasion

6. 14-6 Consumer Psychology and Pricing Reference Prices Price-quality inferences Price endings Price cues

7. 14-7 Table 14.1 Possible Consumer Reference Prices “Fair price” Typical price Last price paid Upper-bound price Lower-bound price Competitor prices Expected future price Usual discounted price

8. 14-8 Table 14.2 Consumer Perceptions vs. Reality for Cars Overvalued Brands Land Rover Kia Volkswagen Volvo Mercedes Undervalued Brands Mercury Infiniti Buick Lincoln Chrysler

9. 14-9 Price Cues “Left to right” pricing ($299 versus $300) Odd number discount perceptions Even number value perceptions Ending prices with 0 or 5 “Sale” written next to price

10. 14-10 When to Use Price Cues Customers purchase item infrequently Customers are new Product designs vary over time Prices vary seasonally Quality or sizes vary across stores

11. 14-11 Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price

12. 14-12 Step 1: Selecting the Pricing Objective Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership

13. 14-13 Figure 14.1 Price Tiers in the Ice Cream Market

14. 14-14 Step 2: Determining Demand Price Sensitivity Estimating Demand Curves Price Elasticity of Demand

15. 14-15 Figure 14.2 Inelastic and Elastic Demand

16. 14-16 Step 3: Estimating Costs Types of Costs Target Costing Accumulated Production Activity-Based Cost Accounting

17. 14-17 Cost Terms and Production Fixed costs Variable costs Total costs Average cost Cost at different levels of production

18. 14-18 Figure 14.4 Cost per Unit as a Function of Accumulated Production

19. 14-19 9 Lives Uses Target Costing

20. 14-20 Step 5: Selecting a Pricing Method Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing

21. 14-21 Figure 14.6 Break-Even Chart

22. 14-22 Auction-Type Pricing English auctions Dutch auctions Sealed-bid auctions

23. 14-23 Step 6: Selecting the Final Price Impact of other marketing activities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties

24. 14-24 Price-Adaptation Strategies Geographical Pricing Discounts/Allowances Differentiated Pricing Promotional Pricing

25. 14-25 Price-Adaptation Strategies Countertrade Barter Compensation deal Buyback arrangement Offset Discounts/ Allowances Cash discount Quantity discount Functional discount Seasonal discount Allowance

26. 14-26 Promotional Pricing Tactics Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting

27. 14-27 Differentiated Pricing and Price Discrimination Customer-segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing

28. 14-28 Table 14.5 Profits Before and After a Price Increase

29. 14-29 Increasing Prices Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts

30. 14-30 Figure 14.7 Price-Reaction Program for Meeting Competitor’s Price Cut

31. 14-31 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

32. 14-32 Marketing Debate Is the right price a fair price? Take a position: 1.Prices should reflect the value that consumers are willing to pay. 2. Prices should primarily just reflect the cost involved in making a product.

33. 14-33 Marketing Discussion As a consumer, which pricing method do you personally prefer to deal with? Why?