Download Laurence Chérel and Catherine Madrid

Pricing policy
Prerequisites:
Resource 265 "Targeting your customers"
Resource 1549 "Positioning your offer"
Resource 268 "Presentation of the marketing mix"
Objectives in terms of expertise




Act on the price variable
Know how to propose a retail price
Know how to argue in favour of this
choice
Know how to change the price
Objectives in terms of content



A definition of the concept
Fixing methods
Reactions to changes in price
Laurence Chérel and Catherine Madrid
The transverse nature of the teaching:
Consumer law
Pricing
policy
Management
accounting
Introduction
to
accounting
Laurence Chérel and Catherine Madrid
DEFINING THE PRICE
Laurence Chérel and Catherine Madrid
THE PRICE:

A monetary expression of the value
Value appreciated in exchange for an
expected satisfaction

Resource to consult: The importance of perceived value

Laurence Chérel and Catherine Madrid
Value is perceived:
Resource to consult: 2012 price image barometer
By OC&C Strategy Consultants
Notion of perceived value:
in time
Laurence Chérel and Catherine Madrid
In effort
Laurence Chérel and Catherine Madrid
FIXING METHODS
Laurence Chérel and Catherine Madrid
Fixing a price:


Traditional and other more recent
methods
N.B. choose just one fixing method
Laurence Chérel and Catherine Madrid
TRADITIONAL METHODS
Laurence Chérel and Catherine Madrid
The traditional method
INTERNAL ASPECTS
EXTERNAL ASPECTS
Marketing goal
Acceptability
by the market
Positioning
Competition
Cost analysis
Regulations
PRICE
Resource to consult: study of the acceptability of a price by the market
Comparison between skimming and penetration
High unit margin
Penetration policy
High sales volume
Low sales volume
Low unit margin
Skimming policy
Laurence Chérel and Catherine Madrid
PENETRATION POLICY

Fix a price that maximizes demand
– to make your mark from the outset in a
large section of the market

In cases where:
– demand is elastic depending on price,
– the company has sufficient production
capacity
– and introduces appropriate distribution
and communication policies
Laurence Chérel and Catherine Madrid
SKIMMING POLICY


Sell at a high price by restricting
yourself to a group of buyers who are
prepared to pay a high price
In cases where:
– demand is inelastic depending on price,
– a fairly short life cycle,
– the product can be rapidly imitated,
– a low, fairly unprofitable price.
Laurence Chérel and Catherine Madrid
RECENT METHODS
Laurence Chérel and Catherine Madrid
The role of price against a
background of bi-polar consumption

Hallmark attribute for the choice of a
basic product
– the individual is looking for functional value
at a lower price
– in a hyper-competitive environment

A challenge to the traditional price-fixing
model
Laurence Chérel and Catherine Madrid
Price and contemporary context
Price
Skimming policy
Penetration policy
Basic product
quality
Example of a contemporary price-fixing context
3,73 €/kg
2,80 €/kg
1,88 €/kg
The target price (or alignment with
the competition)

The price war has an impact on
– The consumer
– Human resources management

The need to differentiate yourself in
other ways to get away from the price
war environment

Resource to consult: “too many low prices kill low
prices”
Laurence Chérel and Catherine Madrid
Flunch: "a menu idea with tasty dishes and
big portions at a very nice price: 4€95."
The New Deal offer



Creating new market conditions by
differentiating yourself in other ways
Offering better value for money through
innovation.
Resource to consult: household appliance rental at
Intermarché
Laurence Chérel and Catherine Madrid
An example of a new deal offer
HP envy 5640
The Every Day Low Price
(EDLP)


Aim: to put an end to promotional oneupmanship by offering low, stable prices
How: through a better organization of all the
company’s processes,
Laurence Chérel and Catherine Madrid
E.D.L.P.: examples:

The Club Méditerranée Best Offer
guarantee

Little Extra: pleasure at low prices
Laurence Chérel and Catherine Madrid
Summary
Advantages
Limitations
Skimming
Adapted to products
that require high
investment
Is there a target consumer
segment?
Penetration
To make your mark
rapidly in the market
The company strategy
needs to favour an
appropriate sales volume,
and the consumer must be
sensitive to a low price
Target price
Adaptation to market
expectations
Participation in a price war
environment
EDLP
A source of strong
differentiation
The company’s processes
must be adapted
New Deal
A source of strong
differentiation
The company offer must
be adapted
The price-fixing process
1
• Define the marketing goal
• Define the Target
• Define the Positioning
2
• Know the cost of manufacturing the product
• Know the price that maximizes demand
• Know the price of your competitors’ offers
3
• Analyze the different options
• Fix the retail price
Laurence Chérel and Catherine Madrid
REACTIONS TO CHANGES IN
PRICE
Laurence Chérel and Catherine Madrid
Buyers’ reactions to changes in price

Possible perceptions of a reduction in
price
–
–
–
–

the product is selling badly
the product will be replaced
the quality has fallen
the price is going to fall further, it would be
better to wait
Possible perceptions of a rise in price
– strong demand and a risk of shortages
– risk of a further increase
– the price is fixed at the maximum tolerated by
the market
Competitors’ reactions to
changes in price

Problem of anticipating the competitor’s
reactions
– analyze the statistics of his previous
reactions
– analyze his strategy
Laurence Chérel and Catherine Madrid
The company’s reactions to its
competitors’ price changes

Maintain your price
– and do nothing
– counter-attack in other areas


Reduce your price
Increase and counter-attack on the
product
Laurence Chérel and Catherine Madrid
Conclusion:


How to fix a price (slide nos. 25 and 26)
How to adjust it to competitors’
manœuvres
Bibliography



Desmet Pierre (2008), Le prix , MBA - Editions d’Organisation –
2nd edition / Eyrolles - Paris, 01/01/2008
KOTLER Philip, DUBOIS Bernard (2012). - Marketing
management. – 14th edition. - Paris: Pearson Education, XL841 pages. (chap 14. Choisir une stratégie de prix )
Revue Décision Marketing n° 6 dedicated to prices
Check your knowledge!
Laurence Chérel and Catherine Madrid