Pricing Strategy

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Pricing Strategy

• Group 4 Section B

Alex Brown Luis Cavero Amedeo Giacomantonio Unni
Pedersen Jung-Ho Song Tetsuma Suzuki
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Aligning Price with Perceived Value
Price communicates to the market the companys
intended value positioning of its product or
brand, Kotler
High
MISSED OPPORTUNITY
Price Paid
PRICE VALUE
UNHARVESTED VALUE
Low
High
Low
Customers Perceived Value
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The 6-Step Pricing Decision Process
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2
3
4
5
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• Select the pricing objective
• Determine demand
• Estimate costs
• Analyze competitor prices and offers
• Select a pricing method
• Select a final price

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Applying the 6-step Process
VS.
VS.
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1 Select the Price Objective
Primary focus on profit maximization
Primary focus on market share maximization.
Secondary focus on profit maximization
Primary focus on profit maximization
Primary focus on market share maximization
(volume)
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2 Determine Demand
Target market is relatively price insensitive.
Demand is inelastic
Target market is relatively price sensitive.
Demand is elastic
Target market is relatively price insensitive.
Demand is inelastic
Target market is highly price sensitive. Demand
is elastic
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3 - Estimate costs
Low volume. Materials mostly leather and rubber
High volume. Materials mostly leather and rubber
Very low volume (hand made). Materials mostly
leather
High volume. Materials mostly synthetic
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4 - Analyze competitor prices and offers
Competitors Armani, Boss, Prada (279 - 345)
Competitors Nike, Puma, Reebok (40 - 59)
Competitors Manolo Blahnik, Versace, Fendi
(400 - 525)
Competitors Wal-Mart, Pay Less (25 - 45)
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5 - Select a pricing method
Perceived-value pricing
Going-rate pricing
Perceived-value pricing
Value pricing
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6 - Select a final price
Overcharging Strategy
350
Medium Value Strategy
49
Premium Strategy
450
Economy Strategy
20
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Responding to Competitor Price Cuts
Maintain perceived value
Depends on position in product lifecycle
Maintain perceived value and status
Discount
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Responding to Competitor Price Increases
Maintain perceived value and status
Depends on elasticity of demand
Difficult to increase price during the season
(very short life-cycle). Raise prices on next
collection
Increase profit through higher volumes
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Questions?