presentasi chapter14 marketing kotler

Chapte

r 14

Develo

ping P

ricing

Strate

gies a

nd Pro

grams

Group 3Dina Mariana Uli Lubis 372515

St Ibrah Mustafa Kamal 372571

Niken Permata Sari 372585

Nindytia Puspitasari Dalimunthe 372599

Chapter QuestionsHow should a company set prices initially for products or services?

How do consumers process and evaluate prices?

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?

Understanding Price

Price

Price is just not a number on tag

Rent, tuition, fares, fees, rates, tolls, retainers, wages, commisions,

etc

A Changing Pricing Environment

Buyers can:

Get instant price comparison from thousand

of vendors

Name their price and have it met

Get products free

A Changing Pricing Environment(Continue…)Sellers can:O Monitor customer behavior and tailor offers to individualsO Give certain customers access to special prices

Buyers and sellers can: Negotiate prices in online auctions and

exchange or even in person

How Companies PriceEffectively designing

and implementing pricing strategies requires

through understanding of consumer pricing psychology and a

systematic approach to setting, adapting, and

changing prices.

Consumer Psychology and Pricing

Reference PricesPossible Consumer Reference Prices

“Fail Price” (What consumers feel the product should cost)Typical priceLast price paidUpper-Bound Price (reservation price or the maximum most consumers would pay)Lower-bound price (lower threshold price or the minimum most consumers would pay)Historical competitior pricesExpected future priceUsual dicounted price

Consumer Psychology and Pricing (Continued….)

Price-quality inferences

Price endings

SETTING THE PRICEA firm must set a price for the first time, when: 1. It develops a new product2. It introduces its regular product into a new distribution channel or geographical area 3. It enters bids on new contract work.

TIERS IN PRICING

AGYA

ALPHARD

AVANZA

KIJANGINNOVA

NEWFORTUNER

Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

STEPS IN SETTING PRICE

Step 1: Selecting the Pricing Objective

Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership

Step 2: Determining Demand

• Price sensitivity• Estimate demand curves• Price elasticity of demand

Figure 14.1 Inelastic and Elastic Demand

Table 14.3 Factors Leading to Less Price SensitivityO The product is more distinctiveO Buyers are less aware of substitutesO Buyers cannot easily compare the quality of substitutes

O Expenditure is a smaller part of buyer’s total income

O Expenditure is small compared to the total costO Part of the cost is paid by another partyO Product is used with previously purchased assets

O Product is assumed to have high quality and prestige

O Buyers cannot store the product

Step 3: Estimating Costs

• Types of costs• Accumulated production• Activity-based cost accounting

• Target costing

Figure 14.2Cost Per Unit at Different Levels of

Production

Cost Terms and Production

• Fixed costs• Variable costs• Total costs• Average cost• Cost at different levels of production

Figure 14.3 Cost per Unit as a Function of Accumulated

Production

Target Costing

Step 4: analyzing competitors’ costs, prices, and offersWhat are some considerations taken by company on nearest competitor pricing?O If the firm’s offer contains features not offered by the nearest competitor, it should evaluate their worth to the customer and add that value to the competitor’s price.

O If the competitor’s offer contains some features not offered by the firm, the firm should subtract their value from its own price.

How can a firm anticipate a competitor’s reactions? One way is to assume the competitor reacts in the standard way to a price being set or changed.

The company will need to research the competitor’s current financial situation, recent sales, customer loyalty, and corporate objectives.

If the competitor has a market share objective, it is likely to match price differences or changes.

If it has a profit-maximization objective, it may react by increasing its advertising budget or improving product quality.

Step 5: Selecting a Pricing Method

The Three Cs Modelfor Price Setting

Six Price-setting Methods

O Markup pricingO Target-return pricingO Perceived-value pricingO Value pricingO Going-rate pricingO Auction-type pricingO * English auctions (ascending bids)O * Dutch auctions (descending bids)O * Sealed-bid auctions

Markup PricingSuppose a toaster manufacturer has the following costs and sales expectations:Variable cost per unit $10Fixed costs $300,000Expected unit sales 50,000The manufacturer’s unit cost is given by:

Now assume the manufacturer wants to earn a 20 percent markup on sales. The manufacturer’s markup price is given by:

Target-Return PricingSuppose the toaster manufacturer has invested $1 million in the business and wants to set a price to earn a 20 percent ROI, specifically $200,000. The target-return price is given by the following formula:

Perceived-Value PricingCaterpillar uses perceived value to set prices on its construction equipment. It might price its tractor at $100,000, although a similar competitor’s tractor might be priced at $90,000. When a prospective customer asks a Caterpillar dealer why he should pay $10,000 more for the Caterpillar tractor, the dealer answers:

$ 90,000 is the tractor’s price if it is only equivalent to the competitor’s tractor$ 7,000 is the price premium for Caterpillar’s superior durability$ 6,000 is the price premium for Caterpillar’s superior reliability$ 5,000 is the price premium for Caterpillar’s superior service$ 2,000 is the price premium for Caterpillar’s longer warranty on parts$110,000 is the normal price to cover Caterpillar’s superior value– $10,000 discount$100,000 final price

The Caterpillar dealer is able to show that although the customer is asked to pay a $10,000 premium, he is actually getting $20,000 extra value

Step 6: Selecting the Final PriceThe company must consider additional factors in selecting price, including :

Impact of other marketing activities

Company pricing policiesGain-and-risk sharing pricing

Impact of price on other parties

Adapting The PricePrice-adaptation strategies:

Price Discounts and AllowancesDiscountQuantity DiscountFunctional DiscountSeasonal DiscountAllowance

Promotional PricingLoss-leader pricingSpecial event pricingSpecial customer pricingCash rebatesLow-interest financingLonger payment termsWarranties and service contractsPsychological discounting

Geographical Pricing (Cash, Countertrade, Barter)In geographical pricing, the company decides how to price its products to difference customers in different locations and countries

Differentiated PricingCompanies often adjust their basic price to accommodate differences in customers, products, locations, and so on.Price discrimination occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. O In first-degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his or her demand.

O In second-degree price discrimination, the seller charges less to buyers of larger volumes.

O In third-degree price discrimination, the seller charges different amounts to different classes of buyers, as in the following cases:

• Customer-segment pricing. • Product-form pricing. • Image pricing. • Channel pricing. • Location pricing. • Time pricing.

# When should a company initiate a price change?

# How should a company respond to a competitor’s price challenge?

Initiating and responding to price changes

Initiating Price Cuts

Shallow-pockets trap

Low quality trap

Price war trap

Fragile- market-share trap

Price cut strategys, in the other possible traps

Initiating price increase

s

Delay quotation pricingDelayed quotation pricing

Reduction of discountsReduction of discounts

Escalator

clausesEscalat

or clauses

Unbunding Unbunding

Table 14.6 Profits Before and

After a Price Increas

e

Brand Leader Responses to Competitive Price Cuts

O Maintain priceO Maintain price and add value

O Reduce priceO Increase price and improve

qualityO Launch a low-price fighter line

Responding to Competitors’ Price Changes

Homogeneous product markets search for ways to

enhance its augmented product

Need price reduction

Non Homogeneous Product MarketsFollowing issues: 1. why did the competitor change the price? 2. does the competitor plan to make the price

change temporary or permanent? 3. what will happen to the company’s market

share and profits if it does not respond? 4. what are the competitors’ and other firms’

responses likely to be to each possible reaction?

The possible responses to

low-cost competiton

Further differentiate the product or

serviceIntroduce a low-

cost venture

Reinvent as a low-cost player