Pricing productsPricing products

Group members:Group members:Pham Thi HuePham Thi Hue

Nguyen Lan AnhNguyen Lan AnhPhan Thi Thu HienPhan Thi Thu HienHoang Thuy DuongHoang Thuy Duong

outlineoutline

I.I. Factors affecting setting pricesFactors affecting setting prices

II.II. General pricing approachesGeneral pricing approaches

III.III. New product pricing strategiesNew product pricing strategies

IV.IV. Products mix pricing strategiesProducts mix pricing strategies

V.V. Price-adjustment strategiesPrice-adjustment strategies

VI.VI. Price changesPrice changes

Factors to consider when setting Factors to consider when setting pricesprices

1. Internal1. Internala. Marketing Objectivesa. Marketing Objectivesb. Marketing mix strategyb. Marketing mix strategyc. Costs c. Costs d. Organizational considerationsd. Organizational considerations2. External2. Externala. Market & demanda. Market & demandb. Competitionb. Competitionc. Environmental elementsc. Environmental elements

InternalInternala. Marketing Objectivesa. Marketing Objectives

SurvivalSurvival Current profit maximizationCurrent profit maximization Market share leadershipMarket share leadership Product quality leadershipProduct quality leadership

Product quality leadership: Product quality leadership:

Viettel telecomViettel telecom

One of three big people in Telecommunication One of three big people in Telecommunication technology with price and promotion technology with price and promotion campaign. Easy to use.campaign. Easy to use.

One of three big people in Telecommunicaton One of three big people in Telecommunicaton technology withtechnology with

Cheap price and broad and regular promotion Cheap price and broad and regular promotion campaigncampaign

Good caring customer servicesGood caring customer services Have the largest mobile usersHave the largest mobile users Convenient and guaranteesConvenient and guarantees Social activites: free mobile phone for new Social activites: free mobile phone for new

graduating studentsgraduating students

competitioncompetition

price and demandprice and demand

II. General pricing II. General pricing approachesapproachesCost-based pricingCost-based pricing

Value-based pricingValue-based pricingCompetition-based pricingCompetition-based pricing

Cost-based pricingCost-based pricing

Cost-plus pricing: adding a standard markup to the Cost-plus pricing: adding a standard markup to the cost of the product. cost of the product.

unit cost=variable cost+ fixed cost/unit sales.unit cost=variable cost+ fixed cost/unit sales.

Markup price=unit cost/(1-desired return on sales)Markup price=unit cost/(1-desired return on sales)

Breakeven pricing: at the price it can break evenBreakeven pricing: at the price it can break even

Breakeven volume=fixed cost/(price- variable cost)Breakeven volume=fixed cost/(price- variable cost)

Value-based pricingValue-based pricing

Based on buyers’ perceptions of valueBased on buyers’ perceptions of value

Cost-based vs value-basedCost-based vs value-based

Cost-based pricingCost-based pricing

product cost price value customersproduct cost price value customers

Value-based pricingValue-based pricing

customers value price cost productcustomers value price cost product

Competition-based pricingCompetition-based pricing

Going-rate pricingGoing-rate pricing

following competitors' pricesfollowing competitors' prices Sealed-bid pricingSealed-bid pricing

how the firm thinks competitors will pricehow the firm thinks competitors will price

New product pricing strategiesNew product pricing strategies

Market skimming pricingMarket skimming pricing Market penetration pricingMarket penetration pricing

Market skimming vs market Market skimming vs market penetration strategiespenetration strategies

Market skimmingMarket skimming-Setting a very high priceSetting a very high price-Conditions: Conditions:

+ high quality and image+ high quality and image

+cost for small volume is +cost for small volume is not so highnot so high

+ position of competitor+ position of competitor

Market penetrationMarket penetration

-Setting a low price-Setting a low price

-Conditions:-Conditions:

+market is highly price +market is highly price sensitivesensitive

+production and +production and distribution costs fall when distribution costs fall when sales volume increasesales volume increase

+position of competitor+position of competitor

Product-mix pricing strategiesProduct-mix pricing strategies

Product line pricingProduct line pricing Optional-product pricingOptional-product pricing Captive-product pricingCaptive-product pricing By-product pricingBy-product pricing Product-bundle pricingProduct-bundle pricing

+

Price- Adjustment Strategies

Internationalpricing

Geographicalpricing

Valuepricing

Promotionalpricing

Psychologicalpricing

Segmented pricing

Discount and allowance

pricing

Strategies

Cash DiscountCash Discount

Quantity DiscountQuantity Discount

Functional DiscountFunctional Discount

Seasonal DiscountSeasonal Discount

AllowanceAllowance

Discount and Allowance pricingReducing prices to reward

customer responses

Discount and Allowance pricingReducing prices to reward

customer responses

reducing prices to buyers who pay their bills promptly

reducing prices to buyers who buy large volumes

reducing prices to trade channelmembers who perform certain functions

reducing prices to buyers who buy merchandise or services out of season

promotional money for an agreement to feature products in some ways

Segmented Pricing

Segmented Pricing

Customer- segment pricingDifferent customers pay different prices

for the same product or service

Customer- segment pricingDifferent customers pay different prices

for the same product or service

Product-form pricingDifferent versions of the product are priced

differently

Product-form pricingDifferent versions of the product are priced

differently

Location pricingDifferent locations are priced differently

even though the cost is the same

Location pricingDifferent locations are priced differently

even though the cost is the same

Time pricingTime pricingPrices vary by the season, the month,Prices vary by the season, the month,

the day, and even the hourthe day, and even the hour

Time pricingTime pricingPrices vary by the season, the month,Prices vary by the season, the month,

the day, and even the hourthe day, and even the hour

Psychological PricingPsychological Pricing

A pricing approach that considers the psychological A pricing approach that considers the psychological

of prices and not simply the economics.of prices and not simply the economics.

The price is used to say something about the product The price is used to say something about the product

+ Price-quality relationship

+ Reference prices: Prices that buyers carry in their minds and refer to when looking at a given product

+ Price-quality relationship

+ Reference prices: Prices that buyers carry in their minds and refer to when looking at a given product

Promotional PricingPromotional Pricing

Temporarily pricing products below the list price

and sometimes even below cost,

to increase short-run sales

Temporarily pricing products below the list price

and sometimes even below cost,

to increase short-run sales

+ Loss leaders

+ Special-event pricing

+ Cash rebates

+ Low-interest financing, longer warranties, free maintenance

+ Loss leaders

+ Special-event pricing

+ Cash rebates

+ Low-interest financing, longer warranties, free maintenance

Value PricingValue Pricing

Finding the delicate balance between Finding the delicate balance between

the price and quality the price and quality

that gives consumers the value they seekthat gives consumers the value they seek

+ Value pricing requires price cutting coupled with finding ways to maintain or even improve quality while still making a profit

+ Value pricing requires price cutting coupled with finding ways to maintain or even improve quality while still making a profit

+“Value” is not the same as “cheap”+“Value” is not the same as “cheap”

Geographical Geographical pricingpricing

+ FOB-origin pricing+ FOB-origin pricing

+ Uniform-delivered pricing+ Uniform-delivered pricing

+ Zone pricing+ Zone pricing

+ Basing-point pricing+ Basing-point pricing

+ Freight-absorption pricing + Freight-absorption pricing

International PricingInternational Pricing

Prices charged in a specific country depend Prices charged in a specific country depend on many factorson many factors

+ Economic conditions+ Economic conditions+ Competitive situation+ Competitive situation+ Laws / regulations+ Laws / regulations+ Distribution system+ Distribution system+ Consumer perceptions+ Consumer perceptions+ Cost considerations + Cost considerations

InitiatingPrice

Increases

CompetitorReactionsTo Price Changes

Initiating Price Cuts

Buyer Reactions

to PriceChanges

Price Changes

Initiating price increasesInitiating price increases

1.1. Circumstances:Circumstances: Cost inflationCost inflation Over demandOver demand

2. Bad effects: resented by customers, dealers, sales 2. Bad effects: resented by customers, dealers, sales forceforce

If succeed: great profitIf succeed: great profit

3.3. Ways Ways InvisibleInvisible Push up openlyPush up openly

IncreaseIncreasess Lower salesLower sales Product hot->buy soonProduct hot->buy soon Unusually good valueUnusually good value Company is greedyCompany is greedy

Example of legal &illegal price Example of legal &illegal price promotional pricingpromotional pricing

Hold Current Price;Continue to MonitorCompetitor’s Price.

Hold Current Price;Continue to MonitorCompetitor’s Price.

Reduce PriceReduce Price

Raise PerceivedQuality

Raise PerceivedQuality

Improve Quality& Increase PriceImprove Quality& Increase Price

Launch Low-Price“Fighting Brand”

Launch Low-Price“Fighting Brand”

Has Competitor CutPrice?

Has Competitor CutPrice?

Will Lower Price Negatively Affect Our

Market Share & Profits?

Will Lower Price Negatively Affect Our

Market Share & Profits?

Can/ Should EffectiveAction be Taken?

Can/ Should EffectiveAction be Taken?

Yes

No

No

No

Responding to price changesResponding to price changes

Q of price changesQ of price changes Why change?Why change? What happen to company MS & profit if not What happen to company MS & profit if not

respond?respond?

AnalysisAnalysis Own product’s stage in life cycle, importance in Own product’s stage in life cycle, importance in

product’s mix, intentions & resources of company, product’s mix, intentions & resources of company, possible customers reactionspossible customers reactions