11. pricing strategy and management
DESCRIPTION
teori mk marketing strategicTRANSCRIPT
PowerPoint Presentation11-*
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PRICING STRATEGY AND MANAGEMENT
Examples Include:
Threats to major airlines by discount carriers.
Pressures on drug companies to reduce prices.
Intense price competition on supermarket chains by Wal- Mart and Costco.
Aggressive discounting by U.S. automobile producers to retain market share.
Threats to strong brands by counterfeit products.
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Part of the reason that pricing is misused and poorly understood is the common practice of making it the last marketing decision. We think that we must design products, communications plans, and a method of distribution before we have something to price. We then use pricing tactically to capture whatever value we can.
T.Nagle, Marketing News, 11/9/98, 4.
STRATEGIC ROLE OF PRICE
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…requires that we put pricing at the beginning of the process. For example, a multi-part marketing strategy usually is required in value-based pricing. Airlines’ complicated service packages with arcane restrictions, and their multiple channels of distribution must support pricing that reflects different values of the service to different segments. Without such a strategy, airlines would capture a much smaller portion of the value they have the potential to create.
T. Nagle, Marketing News, 11/9/98, 4.
Pricing Strategically
Positioning Strategy
Positioning Strategy
Signal to the Buyer
Set Pricing
How large is the product-market in terms of buying potential?
What are the market segments and what market target strategy is to be used?
How sensitive is demand in the segment(s) to changes in price?
How important are nonprice factors, such as features and performance?
What are the estimated sales at different price levels?
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of Brands A-E
Competitor’s positioning on a relative price basis
How active is price in their marketing strategies
Competitors’ success with their pricing strategies
Competitors’ probable responses to alternative price strategies
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Pricing Pressures in the Personal Computer Market
The personal computer market offers an interesting look at the effects of intense competition. Dell, Inc. continually looks to lower its operating expenses in an effort to pass savings to customers. The result over time has enabled Dell to profitably grow at a multiple of the industry, which has had a negative effect on companies such as Hewlett-Packard Co. The pricing pressure on rivals is one of the reasons that led to the merger between Compaq Computer and H-P. The aggressive price competition resulted in H-P’s PC unit reporting a loss in 3rd Quarter 2003. A major competitive hurdle for H-P is Dell’s low-cost direct-sales business model.
Sources: “A Nasty Surprise from HP,” Business Week, September 1, 2003; Gary McWilliams and Pui-Wing Tam, “Dell Price Cuts Put a Squeeze on Rival H-P,” The Wall Street Journal, August 21, 2003, B1 and B7.
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Legal and Ethical Considerations
What are the legal and ethical factors that may affect the choice of a price strategy?
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How visible to make the price of the product?
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Nature of demand in target market
Business and marketing strategy
How Much Flexibility Exists?
Target segments instead of volume
Source: Thomas T. Nagle, “Price Competition,” Marketing Management, Vol. 2, No. 1, 38-45.
11-*
Low-
active
strategy
High-
active
strategy
Low-
passive
strategy
High-
passive
strategy
Active
strategy
Passive
strategy
High
relative
price
Low
relative
price
Determining Specific Prices
Special Pricing Issues
Policy
Pricing Structure
Product mix and line pricing relationships
How individual items in the line are priced in relation to one another
11-*
Price Flexibility
11-*
PRICING STRATEGY AND MANAGEMENT
Examples Include:
Threats to major airlines by discount carriers.
Pressures on drug companies to reduce prices.
Intense price competition on supermarket chains by Wal- Mart and Costco.
Aggressive discounting by U.S. automobile producers to retain market share.
Threats to strong brands by counterfeit products.
11-*
Part of the reason that pricing is misused and poorly understood is the common practice of making it the last marketing decision. We think that we must design products, communications plans, and a method of distribution before we have something to price. We then use pricing tactically to capture whatever value we can.
T.Nagle, Marketing News, 11/9/98, 4.
STRATEGIC ROLE OF PRICE
11-*
…requires that we put pricing at the beginning of the process. For example, a multi-part marketing strategy usually is required in value-based pricing. Airlines’ complicated service packages with arcane restrictions, and their multiple channels of distribution must support pricing that reflects different values of the service to different segments. Without such a strategy, airlines would capture a much smaller portion of the value they have the potential to create.
T. Nagle, Marketing News, 11/9/98, 4.
Pricing Strategically
Positioning Strategy
Positioning Strategy
Signal to the Buyer
Set Pricing
How large is the product-market in terms of buying potential?
What are the market segments and what market target strategy is to be used?
How sensitive is demand in the segment(s) to changes in price?
How important are nonprice factors, such as features and performance?
What are the estimated sales at different price levels?
11-*
of Brands A-E
Competitor’s positioning on a relative price basis
How active is price in their marketing strategies
Competitors’ success with their pricing strategies
Competitors’ probable responses to alternative price strategies
11-*
Pricing Pressures in the Personal Computer Market
The personal computer market offers an interesting look at the effects of intense competition. Dell, Inc. continually looks to lower its operating expenses in an effort to pass savings to customers. The result over time has enabled Dell to profitably grow at a multiple of the industry, which has had a negative effect on companies such as Hewlett-Packard Co. The pricing pressure on rivals is one of the reasons that led to the merger between Compaq Computer and H-P. The aggressive price competition resulted in H-P’s PC unit reporting a loss in 3rd Quarter 2003. A major competitive hurdle for H-P is Dell’s low-cost direct-sales business model.
Sources: “A Nasty Surprise from HP,” Business Week, September 1, 2003; Gary McWilliams and Pui-Wing Tam, “Dell Price Cuts Put a Squeeze on Rival H-P,” The Wall Street Journal, August 21, 2003, B1 and B7.
11-*
Legal and Ethical Considerations
What are the legal and ethical factors that may affect the choice of a price strategy?
11-*
How visible to make the price of the product?
11-*
Nature of demand in target market
Business and marketing strategy
How Much Flexibility Exists?
Target segments instead of volume
Source: Thomas T. Nagle, “Price Competition,” Marketing Management, Vol. 2, No. 1, 38-45.
11-*
Low-
active
strategy
High-
active
strategy
Low-
passive
strategy
High-
passive
strategy
Active
strategy
Passive
strategy
High
relative
price
Low
relative
price
Determining Specific Prices
Special Pricing Issues
Policy
Pricing Structure
Product mix and line pricing relationships
How individual items in the line are priced in relation to one another
11-*
Price Flexibility