Download How to Set the Right Price: Concepts and Practice in University pricing

APPLIED MARKETING
Session 5
Yummy Bar 12.50 kc
Choco-Bar 9.90 kc
What does Price do?



Names Terms of Exchange
Signifies Quality
Shapes the Value of the Product
 How?
 Motivating
consumer to rethink and better understand
what they are being offered
What you need to know before
determining price
1.
2.
3.
4.
Costs
Competitors
Customers and Value
Corporate Strategy
Slide 16.5
The 3 C’s and Pricing Models
Models:
 Markup pricing
 Going-rate pricing
 Perceived-value pricing
 Value pricing
 Premium pricing
 Auction-type pricing
Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009
Costs (costs plus or markup)
= Product Cost
Analyze competitors’ costs, prices and
offers




Consider the nearest competitor’s price
Evaluate worth to customer for differentiated
features
Judge whether the customer will be willing to pay
more
Anticipate response from competition – what would
you do in competition’s place?
Where do customers perceive value?




Features
Buyer’s image of
product performance
Ability to deliver on
time
Warranty





Customer support
Supplier reputation
Trustworthiness and
Reliability
Esteem
End user of the
product
Slide 16.9
Strategic Decisions: the pricing
objective





Survival
Maximum current profit
Maximum market share
Maximum market skimming
Product-quality leadership
Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009
Porter’s Generic Strategies
Target Scope
Competitive Advantage
Low Cost
Product
Uniqueness
Broad
(industry wide)
Overall Cost
Leadership
Differentiation
Narrow
(market
segment)
Cost Focus
Differentiation
Focus
Price-adaptation strategies
Geographical pricing
Discounts/allowances
Promotional pricing
Differentiated pricing
Bundle pricing
Communicating with Customers by
Using Price

Commodification = Products become “commodities”
 Skepticism,
routinized behavior, minimal expectations,
prefer swift and effortless transactions
 All product dimensions are equally palatable,
differences are not worth investigating
 Not about products, but about customers (vs. actual
commodities)
 Objective is to reengage buyer who is past caring
 Tires, Explosives, Car Insurance
Using Price – Change Parameters



Adjust price structure to clarify advantages
Move away from “units sold” model
Examples
 Goodyear,
price on “miles/km” expectation, rather than
engineering
 Orica, price on fragmentation of rock rather than
explosive
 Norwich Union, insurance based on miles driven, rather
than risk
Using Price - Overpricing




Thought-provoking effect of moderate overpricing
(50% to 80%)
Consumer: “Why is this so much more expensive?”
Revives considerations and recall of other features
Apple computers, Starbucks, etc.
Using Price - Partitioning



Use partitioning to highlight overlooked benefits
Showing broken down pricing can cause consumers
to revise behavior
Unbundling
 Cable
television (channels, set top box, internet)
 Low cost airlines (flight, luggage, food)
Using Price – Single Price Point



Customer focuses on choice, rather than price
Swatch -- which is right for me?
iTunes
Varying $0.89 to
$1.29
Uniform $1.29
Likelihood of
Purchase (1 to 5)
2.77
3.63
Songs per month
5.05
6.13
$25.95
$49.10
Implied annual
revenue
Using Price – Free



Power of Free
Free $10 gift certificate, or seven dollars for a $20
gift certificate
Amazon France
 Shipping
for 1 Franc (vs. free)
Slide 16.18
Presenting the price
Price Cues
 ‘Left to right’ pricing
($299 versus $300)
 TiVo (VCR vs. Computer)
 Odd number discount
 $200 vs. $1000
perceptions vs. Even
Apple iPhone
number value
 $600 to $400
perceptions
 Anchor high value
 ‘Sale’ written next to
price
 Limited availability
Anchoring
 Use a comparison

Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009
What is a brand?
A brand is a name, term, sign, symbol or design
or a combination of them, intended to identify
the goods or services of one seller or group of
sellers and to differentiate them from those of
competitors.
Most Valuable Global Brands
Distinguishing between brand
identity and brand image


Brand identity is the way a company aims to
identify or position itself or its product or service;
the visual or verbal expressions of a brand which
leads to the psychological or emotional associations
that the brand aspires to maintain in the minds of
the consumer.
Brand image is the way the public actually
perceives this aim.
The role of brands – for firms (1)
Legal protection
Create loyalty
Serve as a competitive
advantage
Secure price premium
The role of brands – for firms (2)
Increase marketing efficiency
Attract employees
Elicit support from channel
partners
Help segment markets
The role of brands – for customers
Signify quality level
Facilitate purchasing
Reduce risk