14

Developing Pricing
Strategies and Programs

Marketing Management, 13th ed

 Synonyms for Price

Rent Special assessment

Tuition Bribe
Fee Dues
Fare Salary
Rate Commission
Toll Wage
Premium Tax
Honorarium

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-2

 Common Pricing Mistakes

Determine costs and take traditional industry

margins
Failure to revise price to capitalize on market
changes
Setting price independently of the rest of the
marketing mix
Failure to vary price by product item, market
segment, distribution channels, and
purchase occasion

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 Consumer Psychology
and Pricing

Reference Prices

Price-quality inferences

Price endings

Price cues

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 Table 14.1 Possible Consumer
Reference Prices

Fair price Lower-bound price

Typical price Competitor prices
Last price paid Expected future
Upper-bound price price
Usual discounted
price

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 Price Cues

Left to right pricing ($299 vs. $300)

Odd number discount perceptions
Even number value perceptions
Ending prices with 0 or 5
Sale written next to price

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-6

 Steps in Setting Price
Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

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 Step 1: Selecting the Pricing Objective

Survival
Maximum current
profit
Maximum market
share
Maximum market
skimming
Product-quality
leadership

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 Step 2: Determining Demand

Price Sensitivity

Estimating
Demand Curves

Price Elasticity
of Demand
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 Figure 14.2 Inelastic
and Elastic Demand

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 Figure 14.4 Cost per Unit as a
Function of Accumulated Production

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 Step 5: Selecting a Pricing Method
Markup pricing
Target-return pricing
Perceived-value
pricing
Value pricing
Going-rate pricing
Auction-type pricing

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 Figure 14.6 Break-Even Chart

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 Price-Adaptation Strategies

Geographical Pricing

Discounts/Allowances

Promotional Pricing

Differentiated Pricing

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 Promotional Pricing Tactics
Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service
contracts
Psychological
discounting

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-15

 Brand Leader Responses to
Competitive Price Cuts

Maintain price
Maintain price and add value
Reduce price
Increase price and improve quality
Launch a low-price fighter line

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-16