CHAPTER 9

PRICING WITH
MARKETING MIX
 The learning goals of the chapter

Understand and apply the combination of price and other factors when
setting prices
• Price with product
• Price with distribution
• Price with promotion
 Price and Product

Objective: Pricing reflects the interactions between products in a product

portfolio to maximize profit.

• Price of replacement product

• Additional product prices

 Substitute product pricing

• Identify substitute products in the product catalog:

A and B are two substitutes for each other
• Determining the impact of price action through financial analysis:
Adjusted Unadjusted The variable
Contribution
contribution = contribution - sales quantity x
of product B
of product A of product A of product B

Total Profit = Profit A + Profit B

Adjust prices to ensure an increase in total profit and match the supply
capacity of two types of goods.
 Substitute product pricing

Define complementary product set

• Products used together in creating satisfaction
• Shopping products at the same time to save time and cost of shopping
Determine the impact of price on profitability of both products through financial
analysis: Determine the impact of price on profitability of both products through
financial analysis:

Adjusted Unadjusted The variable Contribution of

contribution
= contribution
- sales quantity
x
supplementary products

Adjust prices to maximize total profit

 Low pricing for concurrent supplementary products

• Identify several products in the portfolio for loss pricing

• Low pricing incurs losses for these items.
• Neutral or high pricing for other products
 Select the right distribution channel

Consider how channel selection affects price:

• Low prices need to achieve low distribution costs, which can take advantage
of old distribution channels, distribution channels with few services
• High prices need to achieve high distribution costs, which can expand the
distribution system, independent distribution channels; increased image
recognition; make differences
• High price need to choose a professional distribution channel; reputation;
thoughtful service
 Maintain a minimum resale price

Channel pricing strategy is about managing relationships with resellers, not

dominating their pricing decisions

The maintenance of minimum resale price aims to

• Protect the image of the product
• Avoid price wars
 Solution of manufacturer

• Apply high wholesale prices so that low-priced retailers can achieve low
margins that cannot lower prices
• Ensure retailers receive a large enough profit margin to perform value-
added service
• Promotional help for service retailers
• There may be a category of low-priced retailers based on complaints from
high-priced members
Pricing with advertising

The impact of advertising on price

• Advertising increases price sensitivity by providing product information
• Advertising supports the implementation of the low-price strategy to increase
sales (selling products of similar value but at a lower price)
• Advertising aimed at reducing price elasticity of demand (emphasizing the
unique product value provided to customers in support of a high-priced strategy)
The impact of price on advertising
• Use low prices to promote products at special times
• High price for image positioning
Pricing with personal selling

The personal sales force affects the customer's price sensitivity

Customers are less sensitive when:
• Make customers understand product characteristics and how to use products
(help customers save money in shopping, make products work better, help
reduce inventory, and build loyal customers)
Personal selling supports the implementation of the pricing strategy
• High-price strategy backed by high sales effort
• Low price strategy backed by low sales effort
Pricing and sales promotion tools

Price is an adjunct to sales promotion (Promotion)

Target:
• Increase awareness of new products
• Protect your trademark against competitors' attacks
• Stimulate retailers to stock products and fight the entry of competitors
Some forms of use:
• Trial incentive pricing
• Defensive price promotion
• Promotion through price in the distribution channel
Trial incentive pricing

Objective: Encourage new customers to try the product to know the features of
the new product.
• Encouraging potential buyers to make their first purchase is an important
step in generating sales
Form
• Offer small products at a price that minimizes spending
• Reduce spending by renting
• Promotion price
• Some form of price behavior: Discounts encourage trial; Vouchers; Discount;
Try for free
Uses

• Trial offer

• Coupon

• Rebates

• Free sampling
Trial offer

Is a temporary price cut

Apply:
• For first-time customers
• Popular for new products
• Discount for the end consumer
• Buyers are aware that this is only a special discount
Coupon

Consumer discounts for first-time buyers through coupons

Advantage:
• Promotion to the end buyer
• Limit the number of discount purchases per customer
• As a way to increase the probability of first-time users
Disadvantage:
• High cost of coupons (printing, distribution, paying retailers)
• High rate of fraudulent coupons increases costs
Rebates

Rebates (refund) in total purchase amount when buyer meets certain

conditions
Advantage:
• Reach the goal of price promotion
• Avoid coupon forgery and reward fraud
• Limit rewards to one family, control benefits for repeat buyers
• Low management cost
• Develop potential customers for sales promotion activities
Free sampling

Give away free gifts on their own or with other purchases

Advantages:
• Introduce products quickly and cover more customers
Defect:
• High cost
This applies to products with frequent repeat purchases, and products with
high-profit rates
Defensive price promotions

Use defensive discounts on existing goods in the face of a new

competitor's attack

Promotion through price in the period to maintain customer loyalty

Use for existing brands

Price promotion in distribution

A temporary reduction in wholesale prices for wholesalers or retailers, to

achieve specific short-term goals.
Apply:
• New products with the purpose of being advertised in a good location
• Targeted seasonal products stimulate retailers to stock up on products
• The objective of defense against the introduction of a competitor's
product
Disadvantages:
• Retailers will order more products now and reduce purchases later at
regular prices
• Reaching short-term goals
 References of chapter 9

Nagle, T.T. Holden, R.K, “The strategy and tactics of pricing- A

guide to profitable decision making”, Chapter 10

Vũ Minh Đức, “Quản trị giá trong doanh nghiệp”, NXB Đại học Kinh
tế Quốc dân, 2019, Chapter 9
 Thank you
for listening
Please do not hesitate to ask questions!