DEVELOPING THE

MARKETING MIX:
VALUE PROPOSITION
PRODUCT & PRICE
DIFFERENT PRICING
COMPETITIVE PRICING

• Price signal – prices are set high regardless of high or basic product quality
the high price aims to influence consumer’s perception of high quality.

• Penetration Pricing- exploits economies of scale by having cheaper cost,

superior technology, and a efficient organization.
COMPETITIVE PRICING

• Experience Curve Pricing- exploits a firm’s production experience as cost

decreases due to cumulative volume.

• Geographic Pricing- a pricing strategy can be adopted when there are

adjacent markets separated by transport costs rather than reservation or
transaction costs.
PRODUCT LINE PRICING

• Image Pricing – makes use of high price to signal high quality and uses the
profit it makes from higher priced version of its current product with a
different name or model number and then charge a higher price.

• Price Bundling – the basic idea of bundling is that the whole bundle is
cheaper than the buying the parts separately.
PRODUCT LINE PRICING

• Premium Pricing- the firm sets a high price emphasizing on unique product
features.

• Complementary pricing – three related pricing strategies comprise

complementary pricing: Captive pricing, Two-part pricing, and loss leader
pricing
COMPLEMENTARY PRICING

• Captive pricing – the firm tries to price their product low to attract buyers and recover
from the bigger volume expected in the accessories of consumables.

• Two-part Pricing- refers to pricing commonly used by service-based firms. There is a

fixed fee plus a variable fee charged to the customers.

• Loss leader Pricing- prices of well known brands are dropped to attract traffic to the
store. To ensure the success of this pricing strategy, several national branded products
would be advertised with amazingly low prices.
GENERIC STRATEGY: THE BIGGER PICTURE
OF PRICING

• There are at least three ways to gain and

maintain competitive advantage as part of the
business strategy of a firm. They are: Low-
Cost, Differentiation, and Niche(Focus).
GENERIC STRATEGY: THE BIGGER
PICTURE OF PRICING

Perceived Value- Products have different features or attribute. These attributes

have different levels of importance to the customers.

Demand Differentiation- marketers choose a price level that would support their
planned sales volume and profit.
GENERIC STRATEGY: THE BIGGER
PICTURE OF PRICING

• Going Rate- marketers work within the prevailing market price. Commodities
like gasoline have similar prices except for self service stations. Which charge a
little less

• Sealed bid- marketers price their product or service depending on how

competitors are expected to price theirs.
PSYCHOLOGICAL PRICING

• Also called “noticeable Price Difference”, the psychological pricing is used most
especially in supermarkets and department stores to create an impression of
“good Value”

Example.

A price of P2.95 may sell well as P2.777 but no longer as good if priced at P3.05 or
above.
PRICE ELASTICITY

• Connects the relationship between changes in price and quantities of sales.

Price elasticity means that demand will change if change in pricing occurs.
WHEN TO INCREASE PRICE
• Inflation- price increases from suppliers brought about general wages
increases of laborers, or increase in overhead expenses are some factors,
which any business will experience.
• Foreign exchange- a major change in foreign exchange will necessitate a
review in pricing.
• Shortages- when shortages of raw materials exist; prices normally go up.
• Product repositioning- brands that are relaunched and repositioned from a
perceived low quality brand to high quality brand almost always have to
change price to reflect the new value of the product.
WHEN TO CUT PRICES

• Lower cost- when there is lower cost on utilities and raw materials, the
company may lower their prices.
• Falling Market Shares- lower prices are effective in capturing market shares. It
is also effective in recovering market shares so long as it is timely.
• Excess Capacity-  refers to a situation in which the demand for a company's
goods and services is less than its productive capacity
• Excess inventory- Extra space also means extra costs, and since you have to
include those extra costs in your price, you might end up losing to
competition with other sellers because your price is too high