Pricing Strategy MKT 460 (Strategic Marketing) Taufique Hossain
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- Pricing Strategy MKT 460 (Strategic Marketing) Taufique
Hossain
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- Consumer Psychology and Pricing Reference Prices: Comparing an
observed price to an internal reference price they remember or to
an external frame of reference such as posted regular retailed
price Price-quality inferences: Consumers use price as an indicator
of quality. Price Cues: Consumers perception of prices are also
affected by alternative pricing strategies.
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- Steps in Setting Price Select the price objective Determine
demand Estimate costs Analyze competitor price mix Select pricing
method Select final price
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- Step 1: Selecting the Pricing Objective Survival Maximum
current profit Market penetration pricing Maximum market share
Maximum market skimming Product-quality leadership
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- Step 2: Determining Demand Price Sensitivity Estimating Demand
Curves Price Elasticity of Demand
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- Price sensitivity Customers are less price sensitive when:
There are few or no substitute or competitors They do not readily
notice the higher price They are slow to change their buying habits
They think that the higher prices are justified Price is only a
small part of the total cost of obtaining, operating and servicing
the product over its lifetime.
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- Inelastic and Elastic Demand
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- Estimating demand curves Surveys Price experiments Statistical
analysis Experience/past performance analysis
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- Estimating demand curves 1-7 th March15 th -21 st March22 nd 28
th March No of subscribers 10,000 9,800 9,700 Rate 0.80 0.85 Mins
Used 100 90 88 Revenue 800,000 749,700 725,560 ARPU 80 77 75
Migration 150 200 Churn 50 100 Churn % 0.50%1.00%
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- Step 3: Estimating Costs Types of Costs Target Costing
Accumulated Production
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- Cost Terms and Production Fixed costs Variable costs Total
costs Average cost Cost at different levels of production
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- Cost per Unit as a Function of Accumulated Production
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- Step 5: Selecting a Pricing Method Markup pricing Target-return
pricing Perceived-value pricing Value pricing Going-rate pricing
Auction-type pricing Product line pricing
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- Break-Even Chart
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- 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
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- Price-Adaptation Strategies Geographical Pricing
Discounts/Allowances Differentiated Pricing Promotional
Pricing
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- Price-Adaptation Strategies Countertrade Barter Compensation
deal Buyback arrangement Offset Discounts/ Allowances Cash discount
Quantity discount Functional discount Seasonal discount
Allowance
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- Promotional Pricing Tactics Loss-leader pricing Special-event
pricing Cash rebates Low-interest financing Longer payment terms
Warranties and service contracts Psychological discounting
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- Differentiated Pricing Customer-segment pricing Product-form
pricing Image pricing Channel pricing Location pricing Time pricing
Yield pricing
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- Initiating and responding to price changes Initiating price
cuts Low quality trap Fragile market share trap Shallow pocket trap
Price war trap Initiating price increase Delayed quotation pricing
Escalating clauses Unbundling Reduction of discounts
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- Reactions to competitive price cuts
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