Pricing Strategies Pricing Strategies Additional Considerations Chapter 11 Priciples of Marketing by Philip Kotler and Gary Armstrong PEARSON. 3 Price-Adjustment Strategies Discuss how companies adjust their prices to take into account different types of customers and situations.
5 Public Policy and Marketing Overview the social and legal issues that affect pricing decisions. New-Product Pricing Strategies Pricing strategies usually change as the product passes through its life cycle. Market-Skimming Pricing Market-skimming pricing (or price skimming) set a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. Market-Penetration Pricing Market-penetration pricing sets a low price for a new product in order to attract a large number of buyers and a large market share.
Product Mix Pricing Strategies The strategy for setting a product’s price often has to be changed when the product is part of a product mix. Product Line Pricing Product line pricing sets the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.
Optional Product Pricing Many companies use optional product pricing - offering to sell optional or accessory products along with the main product. Captive Product Pricing Captive-product pricing sets a price for products that must be used along with a main product, such as blades for razor and games for a video-games console. By-Product Pricing Using by-product pricing, the company seeks a market for these by-products to help offset the costs of disposing of them and help make the price of the main product more competitive.
Product Bundle Pricing Using product bundle pricing, sellers often several products and offer the bundle at a reduced price.
Price Adjustment Strategies Companies usually adjust their basic prices to account for various customer differences and changing situations.
Discount and Allowance Pricing Discount is a straight reduction in price on purchases during a stated period of time or in larger quantities. Discount and Allowance Pricing Allowance is promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way. Segmented Pricing In segmented pricing, the company sells a product or service at two or more prices, even though the difference in prices is not based on differences in costs.
Psychological Pricing In using psychological pricing, sellers consider the psychology of prices, not simply the economics.
Promotional Pricing With promotional pricing, companies will temporarily price their products below list price - and sometimes even below cost - to create buying excitement and urgency. Geographical Pricing Geographical pricing sets prices for customers located in different parts of the country or world. Dynamic and Internet Pricing They are using dynamic pricing - adjusting prices continually to meet the characteristics and needs of individual customers and situations. International Pricing Companies that market their products internationally must decide what prices to charge in different countries.
Price Changes After developing their pricing structures and strategies, companies often face situations in which they must initiate price changes or respond to price changes by competitors. Initiating Price Changes In some cases, the company may find it desirable to initiate either a price cut or a price increase. Buyer Reactions to Price Changes A price increase, which would normally lower sales, may have some positive meanings for buyers. Competitor Reactions to Price Changes The competitor can interpret a company price cut in many ways. If the company decides that effective action can and should be taken, it might make any of four responses. Pricing within Channel Levels Price-fixing states that sellers must set prices without talking to competitors.
Pricing across Channel Levels Robinson-Patman Act seeks to prevents unfair price discrimination by ensuring that sellers offer the same price terms to customers at a given level of trade.
MARKETING STRATEGY-AN OVERVIEW 26 PRICE THE COMBINATION OF THE 3 PRECEEDING Ps, DETERMINE THE TARGET CONSUMERS PRECEPTION OF THE VALUE OF THE FIRMS PRODUCT IN A GIVEN COMPETITIVE CONTEXT. Marketing Social scientists tell us ‘each person has a network of 8 to 12 people in their close network of friends, family, and associates. CHAPTER 2 Strategic Planning and the Marketing Process Objective: Selecting the company strategy for long-run survival and explaining the marketing management.
Product, Services, and Branding Strategy A Global Perspective 8 Philip Kotler Gary Armstrong Swee Hoon Ang Siew Meng Leong Chin Tiong Tan Oliver Yau Hon-Ming.
8-6 Products, Services, and Experiences Experiences represent what buying the product or service will do for the customer.
8-25 Organizations, Persons, Places, and Ideas Social marketing is the use of commercial marketing concepts and tools in programs designed to influence individuals behavior to improve their well-being and that of society.

8-26 Product and Service Decisions Individual Product & Service Decisions – A single product Product Line Decisions - A group of related products Product Mix Decisions – The set of product lines and items offered to customers by a particular seller These tools helps the planner to properly view the product so it can achieve competitive superiority and better product strategy. 8-29 Product and Service Decisions Individual Product and Service Decisions Define Quality in terms of the lack of defects or creating customer value and satisfaction Quality level is the level of quality that supports the products positioning.
8-30 Product and Service Decisions Individual Product and Service Decisions Product features are a competitive tool for differentiating a product from competitors products Assessed based on the value to the customer versus the cost to the company. 8-31 Product and Service Decisions Individual Product and Service Decisions Brand is the name, term, sign, or design, or a combination of these, that identifies the maker or seller of a product or service.
8-33 Product and Service Decisions Individual Product and Service Decisions Packaging involves designing and producing the container or wrapper for a product.
8-35 Product and Service Decisions Product Line Decisions Product line length is the number of items in the product line. 2 Product Mix Pricing Strategies Explain how companies find a set of prices that maximizes the profits from the total product mix. 4 Price Changes Discuss the key issues related to initiating and responding to price changes. In this case, the firm looks for a set of prices that maximizes its profits on the total product mix. In product line pricing, management must determine the price steps to set between the various products in a line. And when you order a new computer, you can select from a bewildering array of processors, hard drives, docking systems, software options, and service plans. Another aspect of psychological pricing is reference prices - prices that buyers carry in their minds and refer to when looking at a given product.
We will look at five geographical pricing strategies for the following hypothetical situation. The price that a company should charge in a specific country depends on many factors, including economic conditions, competitive situations, laws and regulations, and the nature of the wholesaling and retailing system. It might think the company is trying to grab a larger market share or that it’s doing poorly and trying to boost its sales.
Sellers are also prohibited from using predatory pricing - selling below cost with the intention of punishing a competitor or gaining higher long- run profits by putting competitors out of business. After creating the value the firm is entitled to capture a portion of it for itself through pricing. THE ADVANTAGE OF SOLVING THE POSITIONING PROBLEM IS THAT IT ENABLES THE COMPANY TO SOLVE THE MARKETING MIX PROBLEM. A distribution channel is a set of INTERDEPENDENT organizations (networks) involved in the process of making a product or a service available for use customers.
The QUESTION in channel design is whether distribution will be direct" sales force),indirect(DISTRIBUTORS, STOCKIEST 3 rd. The second part of channel design is breadth-how intense should the firms presence be in the market?
Promotions or COMMUNICATIONS with the consumer enables awareness of the product, knowledge of its FEATURES, INTEREST in purchasing, purchase EXPERIENCE, RE assurance and repeat purchase. NON-PERSONNEL vehicles: –Advertising-effective in creating awareness, describing the features, suggesting usage SITUATIONS, distinguishing from competitors, directing buyers to point of purchase, creating, enhancing re assuring brand image.
Devising an effective marketing program requires in depth analysis to support decisions on a host of interrelated issues.
Products, Services, and Experiences A product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want. Products, Services, and Experiences Service is a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership. Product and Service Classifications Consumer products are products and services bought by final consumers for personal consumption.
Product and Service Classifications Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort.
Product and Service Classifications Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style.
Product and Service Classifications Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.
Product and Service Classifications Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying. Product and Service Classifications Industrial products are products purchased for further processing or for use in conducting a business.
Product and Service Classifications Materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users.
Product and Service Classifications Capital items are industrial products that aid in the buyers production or operations. Product and Service Classifications Supplies and Services include operating supplies, and repair and maintenance items, as well as maintenance and repair services and business advisory services. Organizations, Persons, Places, and Ideas Organization marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward an organization.
Organizations, Persons, Places, and Ideas Person marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular people.

Organizations, Persons, Places, and Ideas Place marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular places. Companies bringing out a new product face the challenge of setting prices for the first time. Pricing is difficult because the various products have related demand and costs and face different degrees of competition. The reference price might be formed by noting current prices, remembering past prices, or assessing the buying situation.
A seller may simply offer discounts from normal prices to increase sales and reduce inventories.
FOB- origin pricing Uniform- delivered pricing Zone pricing Basing- point pricing Freight- absorption pricing ? This practice means that the goods are placed free on board a carrier.
A price change, especially a drop in price, can adversely affect how consumers view the brand. Or it might think that the company wants the whole industry to cut prices to increase total demand. The generic tasks are product INFORMATION, PRODUCT customization, quality assurance, lot size, product ASSORTMENT LENGTH, breadth and width of product lines), AVAILABILITY, AFTER SALES service, logistics. Effective communications require an integrated plan combing, personal selling and non-personal ones like advertising, sales PROMOTION TRADE fairs, cell phones, packaging) and public relations. RESERCHERS HAVE IDENTIFIED 5 MAJOR ROLES IN BUYING SITUTIONS: –INTIATOR-NEED INDENTICATION, STIMULATE SEARCH. Understand the concepts and processes needed to identify, select, monitor, and evaluate sales channels.
Actual product represents the design, brand name, and packaging that delivers the core benefit to the customer. The channel member can obtain favorable pricing and credit terms, training, engineering support, etc.
They can choose between two broad strategies: market- skimming pricing and market-penetration pricing. More importantly, they should account for differences in customer perceptions of the value of different features. Rising costs squeeze profit margins and lead companies to pass cost increases along to customers. Second Company might improve quality and increase price, moving its brand into a higher price-value position.
The best approach is to develop customer-driven systems to design channel structures and management. The consumer can get online support, version updates, access to forums and communities, etc. Customer-segment pricing Different versions of the product are priced differently but not according to differences in their costs.
Manufacturers sometimes offer cash rebates to consumers who buy the product from dealers within a specified time; the manufacturer sends the rebate directly to the customer. Third Company might launch a low-price “fighter brand” - adding a lower-price item to the line or creating a separate lower-price brand. The physical product, the brand name, the company reputation, after sales support, financing, AVAILABILITY. IMPORTANT CONSIDERATIONS ARE: DOES THE PRODUCT SATISFY CUTOMER WANTS, IS IT PROFTABLE TO THE FIRM, DOES IT DIFFERENTIATE FROM THE COMPETITION, WILL IT COMPLIMENT OR CANNIBALIZE, IMPACT ON BRAND AND COMPANY REPUTATION. What polices and procedures to be used to ensure the necessary functions are performed by the various parties.
Skim" focus on customers with high value-first edition hard cover) and PENETRATION PRICING GENERATE lots of sales, leaves money on the table, important when customers are sensitive to PRICE, ECONOMICS of scale are available, threat of COMPETITION, PRODUCTION capacity available). When a company cannot supply all that its customers need, it may raise its prices, ration products to customers, or both. Quantity Discount A sellers offers a discount to trade- channel members who perform certain functions, such as selling, storing, and record keeping. Trade-in allowance It’s the payments or price reductions that reward dealers for participating in advertising and sales support programs. Product-form pricing A firm varies its price by the season, the month, the day, and even the hour.
Functional Discount (Trade Discount) A price reduction to buyers who buy merchandise or services out of season. Time pricing A company charges different prices for different locations, even though the cost of offering each location is the same.

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