strategic pricing luhan li, andrea dellit, jean vannier, chris spaude

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WHAT IS MONEY?

Money equals time?

Money is not everything, but can get you anything (Julius Mgcini Cindi)

MONEY, MONEY, MONEY!!! (ABBA)

a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively.

“All that people have to do is to agree on what will be used as an intermediary means of exchange and that means of exchange becomes money.

MONEY EVOLVES, AND HAS DIFFERENT VALUES GOLD is the world’s

currency.

But Gold value augments throughout time (An ounce of gold 314-1170 in 12 years)

Money is universal, but its intrinsic value can (and will) evolve.

WHAT IS A PRICE?

PRICE IS NOT MONEY (DENNIS CLAYSON)

Value =

Perceived Benefits

Price

PRICE IS A VALUE!

PRICE IS AFFECTED BY MANY FACTORS

Monetary value

Good/service sold in itself

Supply of the good/service in

itself

Price

PRICE, AS A STRATEGY

Price strategies will be more effective if based on value (aka the breakfast pill/saving life pill )

Price strategies CAN have an ethical component

Marketing loves pricing strategies- flexible to work

with- easy to

benchmark- easy to foresee

( product maturity) - revenues equation

are simple

THE X FACTOR(S)

1. Organizational objectives2. Pricing objectives3. Costs4. Stage of life-cycle5. Channel member expectations6. Supporting other marketing mix objectives7. Competition8. Customer perception and response

And, of course, the government (price fixing, discrimination, minimum prices, advertisement of prices

TO MAKE IT SHORT…

Money is a medium for an exchange.

A price is a value for an exchange. It can be translated with a monetary equivalency.“I promise you blood, sweat and tears. And a victory in the end” (Churchill. The price of war)

IN MARKETING, WE LOVE PRICING STRATEGIES

STAGES OF MANAGING PRICING

• Development of pricing objectives • Profit oriented• Sales oriented• Status quo oriented

• Assessment of target market evaluation of price

• Determination of demand

• Analysis of demand, cost, and profit relationships

• Evaluation of competitors’ prices

• Selection of a basis for pricing

• Selection of a pricing strategy

• Determination of a specific price

PRICING OBJECTIVES

• Profit

• Sales ( Revenue)

• Unit volume ( Product)

• Survival

• Social responsibility

PRIC

ING S

TRAT

EGIES

PRICING STRATEGIES• Needs to be:• Value Based• Pro-active• Profit Drive

• Flawed Strategies• Cost-Plus Pricing• Price product to cover fixed costs/add on profit• Fixed costs change per volume• Sales higher more volume lower fixed costs reduce price???

• Customer Driven Pricing• What will the customer pay• Customer honesty• Customers don’t know value

• Share Driven Pricing• Cutting prices is short term• Maximize profits not market share

CUSTOMARY PRICING

• This is how we have always done it• So this is how we will do it

• They can sell it for ____• We need to sell if for __• Fast Food restaurants

5 cents=5 Pack

VARIABLE PRICING

• Fast changing markets• Cannot set fixed prices, market changes to quick

• Advance s in technology

ONCE PRICE POLICY

• Prices are set• No negotiations• Everyone receives same price

FLEXIBLE PRICING

• Prices can be negotiated• Within reason• Internet has made more common• More options

PSYCHOLOGICAL PRICING

• Odd pricing = $3.99• Represent bargains and savings• Consumer ignore least significant digits• Pricing bands online searches

• Prestige • Expensive=Good• Discounting lower sales

LOSS LEADER

• Selling for a loss in profits• Attract new customers• Offer other products• Come for low price phone buy expensive accessories

PRICE LINING/BUNDLING

• Pricing categories

• Associated with quality levels

• Two for one

PRICE ELASTICITY

• How does demand or supply change with price

• Inelastic vs. Elastic• Slope of Line• Necessity vs Want

ELASTICITY FACTORS (LINE SLOPE)

• Available substitutes• Partially offset• Brand loyalty• Cost of switching

• Income• Changes in the economy• Changes in job market

• Time• Cigarettes• Initial inelastic• Change to elastic (quit)

PRICE VS. VALUE & PRODUCT LIFE CYCLE

• *From from a blog from LiveseySolar Practice

Builders • Pricing professional

services and product life cycles: why you probably should be

increasing your price

CASE: LASER EYE SURGERY IN THE UK*

*From from a blog from LiveseySolar Practice

Builders Pricing professional

services and product life cycles: why you probably should be increasing your

price

CASE: UK LASER SURGERY

• 60% of population need corrective lenses

• 30% are nearsighted

• Claim glasses & contacts: Mature

• Laser Surgery• 36 million eligible• 100,000 choose each year

Laser Surgery :

Introductory

*From from a blog from LiveseySolar Practice

Builders Pricing professional

services and product life cycles: why you probably should be increasing your

price

CASE: INTRODUCTORY STAGE

• High costs

• Low volumes = slow sales

• Little or no competition

• Have to create demand

*From from a blog from LiveseySolar Practice

Builders Pricing professional

services and product life cycles: why you probably should be increasing your

price

CASE: ROGER’S ADOPTION CURVE

• “Laser eye surgery patients are all, by definition “innovators” and

“early adopters”. (The 15% of patients that are first to try any newly

introduced product).”

*From from a blog from LiveseySolar Practice

Builders Pricing professional

services and product life cycles: why you probably should be increasing your

price

CASE: INNOVATORS (FIRST 2.5%)

According to LiveseySolar:

• “Adventuresome”

• Understand complex knowledge

• Cope with high levels of uncertainty

• Happy to pay more to be first

• Technology savvy

• Prefer “educated & engaged”

• Dislike mass marketing

• *From from a blog from LiveseySolar Practice

Builders • Pricing professional

services and product life cycles: why you probably should be

increasing your price

CASE: EARLY ADOPTERS (NEXT 13.5%)

According to LiveseySolar:

• Ok with the early issues

• Will provide feedback

• Are listened to for advice

• More price sensitive group

• Pay for experiences, life change

• Technology savvy

• Prefer “educated & engaged”

• Dislike mass marketing

• *From from a blog from LiveseySolar Practice

Builders • Pricing professional

services and product life cycles: why you probably should be

increasing your price

VALUE MAXIMIZES PROFITS

Recommendation:

“There is still a significant percentage of market that will be happy to pay a higher price”

• Keep price as high as possible

• Price below the innovators

• This will maximize profits

• Price cutters will lose out in the current market

• Prices will decline as gain early majority

• *From from a blog from LiveseySolar Practice

Builders • Pricing professional

services and product life cycles: why you probably should be

increasing your price