Phillip Kevin Lane

Kotler • Keller
Marketing Management • 14e
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Developing
Pricing Strategies
and Programs
Discussion Questions
1. How do consumers process and evaluate prices?
2. How should a company set prices initially for
products or services?
3. How should a company adapt prices to meet
varying circumstances and opportunities?
4. When should a company initiate a price change?
5. How should a company respond to a
competitor’s price change?

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Marketing Mix

Revenue
Cost Producer

Cost Place Promotion Cost

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Pricing

$31.50 $33.50

Bargainin
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 Changing Price Environment
Buyers

I’ll pay $235.00

Instant Price Comparisons

Get Products Free

Name Your Own Price

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 Changing Price Environment
Sellers $29.99 $19.99 $24.99

Selective Pricing

Negotiate Prices
Monitor Customers
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 How Companies Price
Product-line Managers
(w/guidance)

Small Business Owner

Pricing Department
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Consumer Psychology and Pricing
Price-Quality Inferences

Reference Prices

$1. 99
Price Endings

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A Black T-Shirt

Armani - $275

Gap - $14.90

H&M - $7.90
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 Setting the Price

6 Select Final Price

5 Price Method
4 Competitor Analysis
3 Estimate Costs
2 Determine Demand
1 Pricing Objective

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Selecting the Pricing Objective
Survival
Maximum Current Profit
Maximum Market Share
Maximum Market Skimming
Product-Quality Leadership
Other Objectives

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 Determining Demand

Price sensitivity
Estimating demand curves
Price Elasticity of Demand

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Inelastic and Elastic Demand

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 Estimating Costs
Demand Price Ceiling

Price

Price Floor
Profit

Costs

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 Estimating Costs
Types of costs

Fixed Costs
Variable Costs Total Costs
(overhead)

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Fi Costs at Varying Levels of Production

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 Estimating Costs
Accumulated Production

Experience Curve
(Learning Curve)

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 Estimating Costs
Target Costing

Market research Design engineers

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 .3
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Analyzing Competitors’ Offers

Price

Costs Reaction

“A”
“B”

Worth to Customer
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Selecting a Pricing Method

Pricing Methods
• Markup
• Target-return
• Perceived-Value
• Value
• Going-rate
• Auction-type
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 .4
1 4 High Price
re
g u (No possible
Fi demand at this price)

Ceiling price

Three Cs Customers’ assessment

of unique product
features
Model for Orienting point

Price Setting Competitors’ prices

and prices of
substitutes

Costs
Floor Price

Low Price
(No possible
profit at this price)
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 Markup Pricing

Variable cost per toaster $10

Fixed costs $300,000
Expected unit sales 50,000

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Target-Return Pricing

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Target-Return Pricing

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Perceived-Value Pricing
Customer’s perceived-value

• Performance $$$
• Warranty $
• Customer support $
• Reputation $$

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 27 of 33

 Value Pricing
EDLP
THOUSANDS OF

LOW PRICES
Level of
Quality EVERY DAY
throughout the store

P1 C1 P2 C2
High
Pricing
Low
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 Going-Rate Pricing

Commodities

Follow the Leader

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Auction Pricing
English auction
(ascending bids)

Dutch auction
(descending bids)

Sealed-bid auction
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Selecting the Final Price
Impact on others

Brand
Quality

Pricing Policies

Gain-and-risk-sharing
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 Adapting the Price
Geographic Pricing

Price Discounts
and Allowances

Differentiated Pricing

Promotional Pricing
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Dealing with Price Changes
Raising Prices

Cutting Prices

Competitor Moves
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