10-Principles of marketing.ppt (531Kb)
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Chapter
10 Chapter
10 Pricing Products: Pricing Considerations and Approaches PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong
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Factors to Consider When Setting Prices
Factors to Consider When Setting
Prices
Internal Factors
Internal Factors
Pricing Decisions
Pricing
Decisions
External Factors
External Factors
Target
Market Positioning Objectives
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Internal Factors Affecting Pricing Decisions Internal Factors Affecting Pricing Decisions
Marketing Objectives Marketing-Mix Strategy Costs Organizational Considerations
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Market Share Leadership
High Prices to Cover Higher Performance Quality
Product Quality Leadership
High Prices to Cover Higher Performance Quality
Product Quality Leadership
Low as Possible Prices to Become the Market Share Leader.
Market Share Leadership
Low as Possible Prices to Become the Market Share Leader.
Choose the Price that Produces the Maximum Current Profit, Cash Flow or ROI.
Marketing Objectives that Affect Pricing Decisions Marketing Objectives that Affect Pricing Decisions
Current Profit Maximization
Choose the Price that Produces the Maximum Current Profit, Cash Flow or ROI.
Current Profit Maximization
Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business.
Survival
Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business.
Survival
Marketing Objectives Marketing Objectives
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Marketing Mix Variables that Affect Pricing Decisions Marketing Mix Variables that Affect Pricing Decisions
Marketing-Mix Strategy Product Design and Quality Product Design and Quality Distribution Distribution Promotion Promotion Non-Price Factors Non-Price Factors
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Types of Cost Factors that Affect Pricing Decisions Types of Cost Factors that Affect Pricing Decisions
Total Costs
Total Costs
Sum of the Fixed and Variable Costs for a Given Level of Production
Sum of the Fixed and Variable Costs for a Given Level of Production
Variable Costs
Variable Costs
Fixed Costs (Overhead)
Costs that do vary directly with the level of production. Raw materials
Costs that do vary directly with the level of production. Raw materials
Costs that don’t vary with sales or production levels. Executive Salaries Rent
Fixed Costs (Overhead)
Costs that don’t vary with sales or production levels. Executive Salaries Rent
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Costs Considerations Costs Considerations
Cost Per Unit at Different Levels of Production Per Period
it n u r e p t s1
o
2 C
SRAC
3
4 LRAC
00
00
00
00 1, 2, 3, 4,
Quantity Produced per Day
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External Factors Affecting Pricing Decisions External Factors Affecting Pricing Decisions
Market and Demand Competitors’ Costs, Prices, and Offers Other External Factors Economic Conditions Reseller Needs Government Actions Social Concerns
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The Market and Demand Factors that Affect Pricing Decisions The Market and Demand Factors that Affect Pricing Decisions
Monopolistic Competition Monopolistic Competition Many Buyers and Sellers Trading Over a Range of Prices. Monopolistic Competition Monopolistic Competition
Pure Competition Pure Competition Many Buyers and Sellers Who Have Little Affect on the Price. Pure Competition Pure Competition
Many Buyers and Sellers Who Have Little Affect on the Price.
Many Buyers and Sellers Trading Over a Range of Prices.
Few Sellers Each Sensitive to Other’s Pricing/ Marketing Strategies
Single Seller
Different Types of Markets
Different Types of MarketsOligopolistic Competition Few Sellers Each Sensitive to Other’s Pricing/ Marketing Strategies Oligopolistic Competition
Pure Monopoly Single Seller Pure Monopoly
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Demand Curves Demand Curves
A. Inelastic Demand - Demand Hardly Changes With a Small Change in Price.
e c P 2 ri P
P 1 Q Q
2
1 Quantity Demanded per PeriodB. Elastic Demand - Demand Changes Greatly With a Small Change in Price.
e c P’ ri 2 P
P’ 1 Q 2 Q 1 Quantity Demanded per Period
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What is Cost-Plus Pricing and Why is it Popular? What is Cost-Plus Pricing and Why is it Popular?
Minimizes Price Competition Minimizes Price Competition
Perceived
Fairness to
Both Buyers
and Sellers
Perceived Fairness to Both Buyers and Sellers Sellers Are More Certain About Costs Than Demand Sellers Are More Certain About Costs Than Demand
Adding a Standard Markup to the Cost of the Product
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Breakeven Analysis or Target Profit Breakeven Analysis or Target Profit
Pricing Pricing
Tries to Determine the Price at Which a Firm Will
Break Even or Make a Target Profit
) s d an s u o Total Revenue 1,200 th ( 1,000 rs
Target Profit
($200,000)
800 llaTotal Cost o 600 D in 400 Fixed Cost t s 200 o C
10
20
30
40
50 Sales Volume in Units (thousands)
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Value-Based Pricing Value-Based Pricing
Cost-Based Pricing
Value-Based Pricing Product
Customer Product
Customer Cost
Value Cost
Value Price
Price Price
Price Value
Cost Value
Product Customers Product
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Competition-Based Pricing Competition-Based Pricing
Setting Prices Setting Prices Going-Rate Going-Rate Company Sets Prices Based on What Company Sets Prices Based on What Competitors Are Charging. Competitors Are Charging. Sealed-Bid Sealed-Bid ? Company Sets Prices Based on Company Sets Prices Based on What They Think Competitors What They Think Competitors ? Will Charge. Will Charge.