marketing planning session 7.pricing
TRANSCRIPT
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Wide spectrum of consumers-VeryAffluent to Very Poor
Least understood of all financialdecisions
Influenced by front line people
Considerable discretion at lower levels
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Demand
Supply
Competitor Offerings Marketing Mix Factors
Environmental Considerations
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Price Bands
Reference Prices
Price Quality Inferences Price Cues
Special Offers
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Survival
Maximum Current Profit
Maximum Market Share Maximum Market Skimming
Product-Quality Leadership
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Purchase is infrequent
No substitute products from competitors
Do not readily notice the higher price Slow to change buying habits
Think higher prices are justified
Price a small part of total cost ofobtaining, operating and servicing theproduct
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Product is more distinctive
Buyers are less aware of substitutes
Buyers cannot compare options easily Expenditure a small part of buyers income
Expenditure a small part of total purchase
Part of the cost borne by another party Used in conjunction with another product
previously bought
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Surveys
Competitors
Customers
Price Experiments
In-store
Online
Statistical Analysis
Longitudinal (Over Time)
Cross Sectional (Different Locations)
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Reduction in price causes marginalincrease in demand- Inelastic Demand
Reduction in price causes substantialincrease in demand- Elastic Demand
Two Way Elasticity
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Rs. 15
Rs. 10
100 # 105 #
Rs. 15
Rs. 10
100 # 150 #
Quantity Demanded Per Period
Elastic DemandInelastic Demand
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Fixed vs. Variable Costs
Learning Curve
Plant Capacity vs Cost Curves Activity Based Costs
Target Costs
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Rs. 100
100,000 200,000
Accumulated Production
Rs. 80
Rs. 60
300,000 400,000
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Price
Value
Features
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Price Change
New Offering
New Features Enhanced Advertising
Distribution Channel Modification
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Markup Pricing
Target Return Pricing
Perceived Value Pricing Value Pricing
Going Rate Pricing
Auction Type Pricing
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English Auction- One Seller, Many buyerAscending Bids by Buyers
Dutch Auction 1- One Seller, ManyBuyers, Descending Bids by Seller
Dutch Auction 2- One Buyer- Many
Sellers- Descending Bid by Sellers
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Products at several price points withdiffering Value Proposition
Prevents competitor from entering Matches Competitor Offering at different
value points
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Impact of Other Marketing Activities
Company Pricing Policies
Gain and Risk Share Pricing Impact of Pricing on Other Parties
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EDLP: Perception of low price
High Low Pricing: Perception of
occasional high value
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Purchase Volume
Purchase Location
Distribution Channel State of Demand
Inventory Levels
Seasonality/ Time of Day Consumer Promotions
Trade Promotions
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Volume
Long Term Contract
Favourable Payment Terms Additional Services by Intermediary or
Customer
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Loss Leader Pricing
Cash Rebates
Low Interest Financing Longer Repayment Terms
Warranties and Service Cost
Psychological Discounting
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Customer Segment Pricing
Product Form Pricing
Image Pricing Channel Pricing
Location Pricing
Time Pricing
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Price Escalation Clause
Withdrawal of standard discounts
Unbundling services
Shrinking quantity
Lower cost ingredients
Removing product features
Economy brands at marginally lowerprices
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