11-1

11-1

PRINCIPLES OF MARKETING
Eighth Edition
Philip Kotler and Gary Armstrong
Chapter
Chapter
11
11
Pricing Products:
Pricing Strategies

 Copyright 1999 Prentice Hall

 Price
Price -- Quality
Quality Strategies
Strategies
11-2
11-2

Price
Higher Lower

Higher Premium Good-Value

Good-Value
Strategy Strategy
Quality

Strategy

Overcharging
Overcharging Economy
Economy
Lower Strategy
Strategy Strategy
Strategy

 Copyright 1999 Prentice Hall

New
New Product
Product Pricing
Pricing Strategies
11-3
Strategies 11-3

Market
Market Skimming
Skimming Market
Market Penetration
Penetration
> Setting a High > Setting a Low
Price for a New Price for a New
Product to Product in Order
Maximize to Attract a Large
Revenues from Number of Buyers.
the Target Market.
> Results in a Larger
> Results in Fewer, Market Share.
More Profitable
Sales.

 Copyright 1999 Prentice Hall

Product
Product Mix
Mix Pricing
Pricing Strategies
Strategies
11-4
11-4

Product
Product Line
Line Pricing
Pricing
Setting
SettingPrice
PriceSteps
Steps Between
Between Product
Product Line
Line Items
Items
i.e.
i.e.$299,
$299,$399
$399
Optional-Product
Optional-Product Pricing
Pricing
Pricing
PricingOptional
Optionaloror Accessory
AccessoryProducts
Products
Sold
SoldWith
WithTheTheMain
MainProduct
Product
i.e.
i.e.Car
CarOptions
Options
Product
Product Captive-Product
Captive-Product Pricing
Pricing
Mix
Mix Pricing
Pricing Products
ProductsThat
ThatMust
Must Be
Be Used
Used
With
With The
The Main
Main Product
Product
Pricing
Pricing i.e.
i.e.Razor
RazorBlades,
Blades,Film,
Film,Software
Software
Strategies
Strategies By-Product
By-Product Pricing
Pricing
Pricing
PricingLow-Value
Low-ValueBy-Products
By-ProductsToToGet
Get Rid
Rid
of
of Them
Them
i.e.
i.e. Lumber
LumberMills,
Mills,Zoos
Zoos
Product-Bundle
Product-Bundle Pricing
Pricing
Pricing
PricingBundles
BundlesOfOfProducts
ProductsSold
SoldTogether
Together
i.e.
i.e.Season
Season Tickets,
Tickets,Computer
Computer Makers
Makers

 Copyright 1999 Prentice Hall

 11-5
Price-Adjustment
Price-Adjustment Strategies
Strategies
11-5

Price
Price Adjustment
Adjustment Strategies
Strategies

Discount
Discount &
& Allowance
Allowance
Reducing Segmented
Segmented
ReducingPrices
Pricesto
toReward
Reward Adjusting
Customer
Customer Responses
Responsessuch
suchas
as AdjustingPrices
Pricesto
to Allow
Allow
Paying for
for Differences
Differencesin
in Customers,
Customers,
PayingEarly
Earlyor
orPromoting
Promoting Products,
the
the Product.
Product. Products,or
orLocations.
Locations.

Cash
Cash Discount
Discount Customer
Customer

Quantity
QuantityDiscount
Discount Product
Product Form
Form

Functional
FunctionalDiscount
Discount Location
Location

Seasonal
SeasonalDiscount
Discount Time
Time

Trade-In
Trade-In Allowance
Allowance

 Copyright 1999 Prentice Hall

Price-Adjustment
Price-Adjustment Strategies
Strategies
11-6
11-6

• Adjusting Prices for Psychological

Psychological Pricing Effect.
•Price Used as a Quality Indicator.

• Temporarily Reducing Prices to

Promotional Pricing Increase Short-Run Sales.
• i.e. Loss Leaders, Special-Events

• Adjusting Prices to Account for the

Geographical Pricing Geographic Location of Customers.
• i.e. FOB-Origin, Uniform-Delivered,
Zone Pricing, Basing-Point, &
Freight-Absorption.

International Pricing • Adjusting Prices for International

Markets.
• Price Depends on Costs, Consumers,
Economic Conditions & Other Factors.

 Copyright 1999 Prentice Hall

Initiating
Initiating and
and Responding
Responding to
to Price
Price
11-7
11-7

Changes
Changes
Competitor
Reactions
to Initiating
Price Price Cuts
Changes

Price
Changes
Buyer
Reactions Initiating
to Price
Price Increases
Changes

 Copyright 1999 Prentice Hall

 11-8
Price-Adjustment
Price-Adjustment Strategies
Strategies
11-8

Has
HasCompetitor
Competitor Cut
Cut Hold
Price?
No Hold Current
Current Price;
Price;
Price? Continue
ContinuetotoMonitor
Monitor
Competitor’s
Competitor’sPrice.
Price.

Will
WillLower
LowerPrice
Price
Negatively No
NegativelyAffect
AffectOur
Our
Market
Market Share
Share &&Profits?
Profits?
Reduce
ReducePrice
Price

No Raise
Raise Perceived
Perceived
Can/ Quality
Quality
Can/Should
ShouldEffective
Effective
Action
Actionbe
beTaken?
Taken?
Yes Improve
ImproveQuality
Quality
&& Increase
IncreasePrice
Price
Launch
LaunchLow-Price
Low-Price
“Fighting
“FightingBrand”
Brand”

 Copyright 1999 Prentice Hall