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MARKETING Session 15

Value offer – the price

Price and demand 1. Elasticity 2. Additional issues . Introduction and definition B.AGENDA A. Pricing – reference points D. Sensitivity C.

Introduction and definition B. Elasticity 2. Additional issues . Pricing – reference points D. Price and demand 1.AGENDA A. Sensitivity C.

because it defines the generic strategy of a business (cost leadership or differentiation) and it contributes to define its positioning (within perceptual maps).A. Price from a Marketing Perspective • The price is the monetary value in the exchange of a product and corresponds to its exchange value. This exchange value is determined by the utility and satisfaction derived from the purchase and use or consumption of the product. • Price is a key competitive tool. .

• Price elasticity is very strong • Price is the most “flexible” tool in the marketing mix .A. Price from a Marketing Perspective • Price has strong impact on revenues and profits (directly and indirectly. because of its impact on demand).

35 .3.12 +30% advertising investment = -1% price cut • Personal selling elasticity 0.6 .2.6 • Advertising elasticity 0.MM elasticities • Price elasticity • Price promotion elasticity .

Pricing . tactic .objectives • Survival • Status quo • Positioning strategic • Maximize sales volumes (and MS) • Maximize profits (and/or ROI) • • Communicate product quality • Increase penetration in distribution • econ.

image – Small production – Low competition Penetration • Pursue cost leadership strategies • Mass Market • Exploit market share Conditions – High price sensitivity – Economies of scale – High actual or potential competition .Pricing .strategies Skimming • Pursue differentiation strategies • Segment the market • Exploit temporary monopoly Conditions – High quality.

Price and demand 1. Introduction and definition B.AGENDA A. Pricing – reference points D. Sensitivity C. Elasticity 2. Additional issues .

B.1. Price and demand elasticity (behavior) Elasticity – measure that shows the responsiveness of the quantity demanded of a good or service to a change in its price ε = the percentage change in quantity demanded in response to a one percent change in price % change Quantity = % change Price .

MS differential) . check changes in demand (price differential.Demand elasticity . check changes in demand • Cross-sectional analysis – Changes in price across micro-markets (geographical area.methods • Longitudinal analysis – Changes in price over time. shops).

.Likely I wouldn’t buy 6. 3.Likely I would buy 4. Price and demand sensitivity (attitude) Sensitivity – measure that shows the responsiveness of the attitude towards buying a good or to a change in its price Would you buy this product if the price was__? And if it was__? .Surely I wouldn’t buy 4% -7% 1% 22% 2% 65% 5% -14% 2% 24% 2% 54% € 40 15% 2% 30% 4% 18% 1% 30% .2.B. 5.Surely I would buy 2. Price € 80 €150 1. 7..

so that it is not out of the question. but you would have to give some thought to buying it? (Expensive/High Side) • At what price would you consider the product to be a bargain—a great buy for the money? (Cheap/Good Value) .Van Westendorp analysis • At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive) • At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good? (Too cheap) • At what price would you consider the product starting to get expensive.

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AGENDA A. Price and demand 1. Elasticity 2. Additional issues . Sensitivity C. Pricing – reference points D. Introduction and definition B.

choose price (base. fixed) Forecast sales level Based on objectives. target ) Analyze elasticity and sensitivity of demand Assess perceived value (composition/ decomposition) Choose price Monitor competitors’ prices Based on competitive position. technical. Pricing methods 1. Competition-based (Competitors) . Cost-based (Company) – – – Identify costs (variable.C. choose price 2. Value-based (Customers)) – – – – – 3.

Conceptual Orientation to Price Demand factors (Price ceiling) Value to buyers Competitive factors Final pricing discretion Initial pricing discretion Corporate objectives and regulatory constraints Direct variable costs (Price floor) .

Elasticity 2. Pricing – reference points D. Introduction and definition B. Price and demand 1. Sensitivity C. Additional issues .AGENDA A.

Additional issues • Price discrimination – different prices in different markets • Yield management – dynamic management of price and demand • “free” clients/ products – management of network externalities or dual markets .D.