Principles of Marketing

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Principles of Marketing
Lecture-27
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Summaryof Lecture-26
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Price - Quality Strategies
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Price Higher Lower
Premium Strategy
Good-Value Strategy
Higher
Overcharging Strategy
Economy Strategy
Quality
Lower
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Price-Adjustment Strategies
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• Discount and Allowance Pricing
• Segmented Pricing
• Psychological Pricing
• Promotional Pricing
• Geographical Pricing
• International Pricing

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Todays Topics
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Initiating and Responding to Price Changes
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Initiating Price Cuts
Competitor Reactions To Price Changes
Price Changes
Buyer Reactions to Price Changes
Initiating Price Increases
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Price Changes
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• 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

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• 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.

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• 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

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Responding to price changes
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Has Competitor Cut Price?
Hold Current Price Continue to
Monitor Competitors Price.
No
Will Lower Price Negatively Affect Our Market
Share Profits?
Reduce Price
No
Raise Perceived Quality
Can/ Should Effective Action be Taken?
Improve Quality Increase Price
No
Launch Low-Price Fighting Brand
Yes
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• Respond To Price Changes Only If
• Market share / profits will be negatively
  affected if nothing is changed.

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• Four strategies
• Reduce price
• Raise perceived quality
• Improve quality and increase price
• Launch a low price fighting brand

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• End of Price part..

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• Review 2nd P (Price)

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What is Price?
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Price Has Many Names

• Bribe
• Salary
• Wage
• Interest
• Tax

• Rent
• Fee
• Rate
• Commission

• Tuition
• Fare
• Toll
• Premium

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Definition
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• 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.

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Factors Affecting Price Decisions
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Internal Factors
Pricing Decisions
Positioning Objectives
Target Market
External Factors
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Internal Factors Affecting Pricing Decisions
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Marketing Objectives
Marketing-Mix Strategy
Costs
Organizational Considerations
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External factors affecting Pricing decisions
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Market and Demand
Competitors Costs, Prices, and Offers
Other External Factors Economic
Conditions Reseller Needs Government
Actions Social Concerns
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Price Elasticity of Demand

• How quantity demanded responds to price changes

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General Pricing Approaches
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• Cost-based Pricing
• Value-based Pricing
• Competition-based Pricing

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Break-evenforDetermining Target Return Price
and Break-even Volume
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Total revenue
1200
Target profit
Total cost
1000
Break-even point
800
600
Rupees (in thousands)
400
Fixed cost
200
0
10
20
30
40
50
Sales volume in units (thousands)
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New Product Pricing Strategies
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• Market Skimming
• Market Penetration

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Product Mix Pricing Strategies
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Product Line Pricing
Optional-Product Pricing
Captive-Product Pricing
By-Product Pricing
Product Mix Pricing Strategies
Product-Bundle Pricing
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Price - Quality Strategies
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Price Higher Lower
Premium Strategy
Good-Value Strategy
Higher
Overcharging Strategy
Economy Strategy
Quality
Lower
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Price-Adjustment Strategies
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• Discount and Allowance Pricing
• Segmented Pricing
• Psychological Pricing
• Promotional Pricing
• Geographical Pricing
• International Pricing

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Initiating Price Cuts
Competitor Reactions To Price Changes
Price Changes
Buyer Reactions to Price Changes
Initiating Price Increases
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Responding to price changes
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Has Competitor Cut Price?
Hold Current Price Continue to
Monitor Competitors Price.
No
Will Lower Price Negatively Affect Our Market
Share Profits?
Reduce Price
No
Raise Perceived Quality
Can/ Should Effective Action be Taken?
Improve Quality Increase Price
No
Launch Low-Price Fighting Brand
Yes
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Enough for Pricing. . .
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Summary
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Next.
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Principles of Marketing
Lecture-27