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Principles of Marketing - Kotler: Pricing Strategies
Principles of Marketing - Kotler: Pricing Strategies
-Kotler
VHS -ASB
2 wheeler categories , segments
VHS-ASB
Learning Objectives
After studying this chapter, you should be able to:
1. Describe the major strategies for pricing initiative
and new products
2. Explain how companies find a set of prices that
maximize the profits from the total product mix
3. Discuss how companies adjust their prices to take
into account different types of customers and
situations
4. Discuss the key issues related to initiating and
responding to price changes
VHS-ASB 11-2
4 P’s
Importance of ‘Price’
Cost, Profit, market share, price elasticity,
Primary demand vs. secondary demand
Who determines price?
Price vs.value . psychological
segmentation
VHS-ASB
Electrical Equipment Limited – case
VHS-ASB
Srikant goes shopping
What price does he pay for his soap?
Why does he pay that? What is right
price for him? What does he refer it to?
VHS-ASB 11-3
Hi MRP./ low street price Psychological
tool. Perceived value.
Price – Quality inferences.
Scarcity – limited editions.
Price cues. ‘Bata’ pricing. Left digit.
Rounding off . 0, 5
VHS-ASB
Pricing objectives
Survival: short term. Over capacity, intense
comp. V.C + some FC.
Max. current profit. Demand and cost.
Max mkt share: price sensitive mkt.
economies of scale.
Max mkt skimming.
Product – quality leadership. “affordable
luxuries”
Partial cost recovery. NGO, govt. edu
VHS-ASB
Demand
Price sensitivity . Price elasticity
Inelastic when ; distinct, not aware of
substitutes, essentials, small
expenditure, infrequent, cost borne by
another party, can not store, industrial
products.
VHS-ASB
Break even analysis.
VHS-ASB
New-Product Pricing Strategies
Pricing Strategies
VHS-ASB 11-4
New-Product Pricing Strategies
Pricing Strategies
Market skimming pricing is a strategy with high
initial prices to “skim” revenue layers from the
market
Pricing Strategies
VHS-ASB 11-6
Product Mix Pricing Strategies
Pricing Strategies
VHS-ASB 11-7
Product Mix Pricing Strategies
Pricing Strategies
VHS-ASB 11-9
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-10
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-11
Price Adjustment Strategies
Pricing Strategies
Pricing Strategies
VHS-ASB 11-13
Price Adjustment Strategies
Pricing Strategies
• Discounts
• Cash discount for paying promptly
• Quantity discount for buying in large volume
• Functional (trade) discount for selling, storing,
distribution, and record keeping
VHS-ASB 11-14
Price Adjustment Strategies
Pricing Strategies
• Allowances
• Trade in allowance for turning in an old item
when buying a new one . Exchange / trade-in
• Promotional allowance to reward dealers for
participating in advertising or sales support
programs
VHS-ASB 11-15
Price Adjustment Strategies
Pricing Strategies
To be effective:
• Market must be segmentable
• Segments must show different degrees of demand
• Watching the market cannot exceed the extra
revenue obtained from the price difference
• Must be legal
VHS-ASB 11-17
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-18
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-20
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-24
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-25
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-26
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-27
Price Adjustment Strategies
Pricing Strategies
• Dynamic pricing
• International pricing
VHS-ASB 11-28
Price Adjustment Strategies
Pricing Strategies
VHS-ASB 11-29
Price Adjustment Strategies
Pricing Strategies
International pricing is when prices are set in a
specific country based on country-specific factors
• Economic conditions
• Competitive conditions
• Laws and regulations
• Infrastructure
• Company marketing objective
• PPP.
• Gray market
VHS-ASB 11-30
Price Changes
• Price cuts
• Price increases
VHS-ASB 11-31
Price Changes
Initiating Pricing Changes
• Price cuts
• New models will be available
• Models are not selling well
• Quality issues
• Price increases
• Product is “hot”
• Company greed
VHS-ASB 11-33
Price Changes
Responding to Price Changes
Questions
• Why did the competitor change the price?
• Is the price cut permanent or temporary?
• What is the effect on market share and
profits?
• Will competitors respond?
VHS-ASB 11-34
Price Changes
Responding to Price Changes
Solutions
• Reduce price to match competition
• Maintain price but raise the perceived value
through communications
• Improve quality and increase price
• Launch a lower-price “fighting brand”
VHS-ASB 11-35
Public Policy and Pricing
VHS-ASB 11-39
Public Policy and Pricing
Pricing Across Channel Levels
VHS-ASB 11-39