Strategic

m Marketing

Professor: Carla Pennano

2023
Class general topics
• Strategic Marketing Planning
• Market Segmentation
• Positioning strategy
• Differentiation strategies
• Product
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• Innovation and development
• Brand
• Price
• Plaza and distribution channels
• Promotion
• Marketing mix for intangibles
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What is price? https://www.youtube.com/watch?v=sF6AMj3H0jg

• The sum of all the values that customers give up to gain the benefits of having
or using a product or service.

• Characteristics

• The only element in the

marketing mix that produces
revenue. m

• The number-one problem facing

many marketing executives.

• One of the most flexible

marketing mix elements.

• Have a direct impact in a firm’s

bottom line.
What is price?

• Price is an important marketing mix tool for both creating and capturing
customer value.

• Customers rarely buy price alone, they seek products that give them the best
value in terms of benefits received for the prices paid.

• There are 3 main

pricing strategies: m
customer value based,
cost based and
competition-based
pricing.

• There are many

internal and external
factors that affect a
firm’s pricing decisions.
Major considerations in setting prices
https://www.youtube.com/watch?v=R2FUvG-Fml4

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Major pricing strategies: https://www.youtube.com/watch?v=elfq9K57Hq0

https://www.youtube.com/watch?v=R2FUvG-Fml4
Value-Based Pricing

• Good-value pricing: Offering the right combination of quality and good

service at a fair price.

• Value-added pricing: Adding value-added features to differentiate offers and

thus support the higher prices.

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Cost-Based Pricing

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Cost-Based Pricing

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Cost-Based Pricing

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Cost oriented pricing: Cost-Plus Pricing (markup pricing)

• Sellers are more certain about

costs than about demand.

• When all firms in the industry

use this pricing method, prices
tend to be similar, so price m
competition is minimized.

• Many people feel that cost-plus

pricing is fairer to both buyers
and sellers.
Cost oriented pricing: Break-Even Analysis and
Target Profit Pricing

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Cost oriented pricing: Break-Even Analysis and Target Profit
Pricing

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Cost-Based Pricing vs. Value-Based Pricing

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Competition-Based-Pricing

• Setting prices based on

competitor’s strategies,
prices, costs and market
offerings.

• Consumers will base their

judgments of product’s
value on the prices that
competitors charge for
similar products.
• The goal is not to match or
beat competitors, but rather
to set prices according to
relative value.
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Caterpillar
• Makes high quality, heavy-duty
construction and mining equipment.
• It dominates its industry despite
charging higher prices than
competitors.
Internal and external factors affecting price decisions

• Internal factors: The

company’s overall
marketing strategy,
objectives, and
marketing mix as well as
other organizational m
considerations.

• External factors: The

nature of the market and
demand and other
environmental factors.
The market and demand

• The marketer must understand the relationship between price and demand for
the company’s product.

Types of market

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Pricing in the different types of markets

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The price-demand relationship

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Price elasticity
• A measure of the sensitivity of
demand to changes in price.
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The economy
• Affect consumer spending,
consumer perception of the
product’s price and value, and
the company’s cost of producing
and selling a product.
Pricing Activity
• Please provide one example (product, service or brand) for each of the following
pricing strategies:

• Value-based pricing strategy

• Good-value pricing
• Value-added pricing

• Cost-based pricing strategy m

• Low-cost producer
• High-cost producer

• Competition- based pricing

strategy
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Market-Skimming Pricing

• 1. The product’s quality and

image must support its higher
price, and enough buyers
must want the product at that
price

• 2. The costs of producing a m

smaller volume cannot be so
high that they cancel the
advantage of charging more.
Setting a high price for a new
• 3. Competitors should not be product to skim maximum
able to enter the market easily revenues layer by layer from the
and undercut the high price.
segments willing to pay the high
price.
Market-Penetration Pricing

• 1. The market must be highly

price sensitive so that a low
price produces more market
growth.

• 2. Production and distribution

costs must decrease as sales
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volume increases.

• 3. The low price must help

keep out the competition, and
the penetration price must
Setting a low price for a new
maintain its low-price position.
product in order to attract a large
number of buyers and a large
market share.
Product-Mix Pricing Strategies

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Product-Line Pricing

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Optional-Product Pricing

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Captive-Product Pricing

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By-Product Pricing

When meat is processed for human

consumption, the by product can be
used as food for dog/cat. So the
manufacturer can sell it to recover
some of his expenses.
Product Bundle Pricing

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Price Adjustments Strategies

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Discount and allowance pricing

Companies adjust their basic price to reward customers for certain

responses, such as paying bills early, volume purchases, and off-season
buying
Discounts

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Allowances

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Segmented pricing

Selling a
product or
service at 2 or
more prices,
where the
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difference in
prices is not
based on
differences in
costs.
Forms

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Forms

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Forms

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Psychological Pricing

• Pricing that considers the

psychology of prices and not
simply the economics.

• Reference Pricing

• Prices that buyers carry in

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their minds and refer to when
looking at a given product.
Promotional Pricing

• Temporarily
pricing products
below the list
price, and
sometimes even
below cost, to
increase short- m
run sales.
Geographical Pricing

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5 Geographical Pricing Strategies

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Dynamic and Personalized Pricing

• Adjust prices according to market forces and consumer situations.

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International Pricing
• Companies that charges their products For example: The Big Mac
internationally must decide what prices
to charge in different countries.

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Pricing Activity
• Please provide one example (product, service or brand) for each of the following
pricing strategies:

• Market-Skimming Pricing
• Market-Penetration Pricing
• Product-line pricing
• Optional-product pricing
• Captive product pricing m
• By-product pricing
• Product bundle pricing
• Discount and allowance pricing
• Segmented pricing
• Psychological pricing
• Promotional pricing
• Geographical pricing
• Dynamic and personalized pricing
• International pricing
 Strategic
m Marketing

Professor: Carla Pennano

2023