PowerPoint Slides to accompany Rix Marketing: A Practical Approach 7e

Bargain! You Get What You Pay For

Rix Marketing: A Practical Approach 7e Next: What is Price?Chapter Ten: Pricing Strategies

Rix Marketing: A Practical Approach 7e Next: Strategic Price SettingChapter Ten: Pricing Strategies Learn more on pages 348 - 349

What is Price?

• The money value of an item

• What you pay for what you get

• Tangible aspectso quantity, quality, performance and features

• Intangible aspectso status, approval, security, peace of mind

Marketers give a special meaning to the term price:

Rix Marketing: A Practical Approach 7e Next: Pricing GoalsChapter Ten: Pricing Strategies Learn more on page 349

Strategic Price SettingStage 1: Set a pricing goal

Profit-oriented Sales-oriented Status quo-oriented

Stage 2: Consider costs, demand and competitorsEstimate sales around the expected price Consider marketing mix elements

Stage 3: Set the base priceCost-based Demand-based Competition-based

Stage 4: Adjust the base priceEntry price Discounts and allowances Freight chargesFixed or flexible pricing Price lining Psychological pricingLoss leaders Recommended retail price

Rix Marketing: A Practical Approach 7e Next: Factors Influencing PriceChapter Ten: Pricing Strategies Learn more on pages 350 - 352

Pricing Goals

• Sales oriented goals

o achieve target sales volumeo achieve target market share

• Profit oriented goals

o maximise gross profito achieve target ROI • Status-quo goals

o stabilise priceso meet competitiono ‘don’t rock the boat’

Rix Marketing: A Practical Approach 7e Next: Elasticity of DemandChapter Ten: Pricing Strategies Learn more on pages 352 - 360

Factors Influencing Price

• Demand factorso expected price rangeo elasticity of demando other marketing mix elements

•Cost factors

o fixed and variable costs

o total cost at different volumes

• Competitive factors

o are we a price maker or price taker?

Before setting a base or list price marketers need to consider:

Rix Marketing: A Practical Approach 7e Next: Product Cost at Various Levels of OutputChapter Ten: Pricing Strategies Learn more on pages 354 - 356

Elasticity of Demand

Rix Marketing: A Practical Approach 7e Next: Setting Base PriceChapter Ten: Pricing Strategies Learn more on pages 358 - 360

Measuring Product Cost at Various Levels of Output

Rix Marketing: A Practical Approach 7e Next: Break-even Analysis: A Useful ToolChapter Ten: Pricing Strategies Learn more on pages 360 - 370

Setting Base Price

In practice, marketers set their base (or list) price by:

o Adding a profit margin to costo Estimating demand (how many will sell) at various priceso Pricing above, below or the same level as their competitors’ prices

Rix Marketing: A Practical Approach 7e Next: Marketing Pricing: Price SkimmingChapter Ten: Pricing Strategies Learn more on pages 365 - 366

Break-even Analysis: A Useful Tool

Rix Marketing: A Practical Approach 7e Next: Marketing Entry Pricing: Penetration Pricing Chapter Ten: Pricing Strategies Learn more on pages 370 - 371

Market Entry Pricing: Price Skimming

• Can establish a premium image• Gives price flexibility• Works best when:

o new product is distinctiveo demand is inelastic o PLC is in the early stageso patents or other technology protect the product

Setting price at or above our most expensive competitor price and highest customers’ expected price.

Rix Marketing: A Practical Approach 7e Next: What Kind of Discount is This?Chapter Ten: Pricing Strategies Learn more on page 371

Marketing Entry Pricing: Penetration Pricing

• Can achieve fast high-volume sales• Discourages competitors• Works best when:

o demand is elastico economies of scale are possible o strong and fast competition is expected

Setting a price below our cheapest competitor price and lower level of customers’ expected price.

Rix Marketing: A Practical Approach 7e Next: What Kind of Discount is This?Chapter Ten: Pricing Strategies Learn more on pages 371 - 382

Price Adjustment Strategies

•Discounts and allowances

o quantity discountso trade discountso settlement discountso promotion discounts

• Geographic pricing

o ex-factoryo uniform deliveredo zone deliveredo freight absorption

• Other pricing tactics

o flexible pricingo price liningo odd pricingo loss leader pricingo recommended retail price

Marketers adjust their base prices in various ways:

What Kind of Discount is This?

Rix Marketing: A Practical Approach 7e Next: Changing prices Chapter Ten: Pricing Strategies

Rix Marketing: A Practical Approach 7e Next: Five Minute Quiz Chapter Ten: Pricing Strategies Learn more on pages 382 - 383

Changing Prices Marketers change their price in order to:

• Recover cost increases• Clear excess stock• Win market share• Promote particular products• Achieve sales budgets

Marketers need to consider competitor motives and reactions when making or

responding to price changes.

Five Minute Quiz

1. Define price from a marketing perspective2. List three common pricing goals3. Define price elasticity of demand4. List four types of discounts offered by firms5. List four alternative ways of allowing

for freight costs in a firm’s price

Rix Marketing: A Practical Approach 7e Chapter Ten: Pricing Strategies