MARKETING MANAGEMENT

12th edition

14
Developing Pricing
Strategies and
Programs

Kotler Keller
Chapter Questions
• How do consumers process and evaluate
prices?
• How should a company set prices initially for
products or services?
• How should a company adapt prices to meet
varying circumstances and opportunities?
• When should a company initiate a price
change?
• How should a company respond to a
competitor’s price challenge? 14-2
Whirlpool’s Duet
combo is nearly
four times the
price of
comparable
models

Pencuci dan
Pengering

14-3
Synonyms for Price
• Rent • Special assessment
• Tuition • Bribe
• Fee • Dues
• Fare • Salary
• Rate • Commission
• Toll • Wage
• Premium • Tax
• Honorarium

14-4
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
• Terlupakan : harga juga mencerminkan nilai dan
positioning
14-5
Consumer Psychology and Pricing

Reference Prices

Price-quality inferences

Price endings

Price cues

14-6
Table 14.1 Possible Consumer
Reference Prices
• “Fair price” • Lower-bound price
• Typical price • Competitor prices
• Last price paid • Expected future price
• Upper-bound price • Usual discounted
price

14-7
Table 14.2 Consumer
Perceptions vs. Reality for Cars
Overvalued Brands Undervalued Brands
• Land Rover • Mercury
• Kia • Infiniti
• Volkswagen • Buick
• Volvo • Lincoln
• Mercedes • Chrysler

14-8
Price Cues
• “Left to right” pricing ($299 versus $300)
• Odd number discount perceptions
• Even number value perceptions
• Ending prices with 0 or 5
• “Sale” written next to price

14-9
When to Use Price Cues
• Customers purchase
item infrequently
• Customers are new
• Product designs vary
over time
• Prices vary seasonally
• Quality or sizes vary
across stores

14-10
Steps in Setting Price
Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

14-11
Step 1: Selecting the Pricing
Objective

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

14-12
Figure 14.1 Price Tiers in the Ice
Cream Market

14-13
Step 2: Determining Demand

Price Sensitivity

Estimating
Demand Curves

Price Elasticity
of Demand

14-14
Figure 14.2 Inelastic and Elastic Demand

14-15
Step 3: Estimating Costs

Types of Costs
Accumulated
Production
Activity-Based
Cost Accounting
Target Costing

14-16
Cost Terms and Production
• Fixed costs
• Variable costs
• Total costs
• Average cost
• Cost at different levels
of production

14-17
Figure 14.4 Cost per Unit as a Function of
Accumulated Production

14-18
9 Lives Uses Target Costing

14-19
Step 5: Selecting a
Pricing Method
• Markup pricing
• Target-return pricing
• Perceived-value
pricing
• Value pricing
• Going-rate pricing
• Auction-type pricing

14-20
Figure 14.6 Break-Even Chart

14-21
Auction-Type Pricing

English auctions

Dutch auctions

Sealed-bid auctions

14-22
Step 6: Selecting the Final Price

• Impact of other
marketing activities
• Company pricing
policies
• Gain-and-risk sharing
pricing
• Impact of price on other
parties

14-23
Price-Adaptation Strategies

Geographical Pricing

Discounts/Allowances

Promotional Pricing

Differentiated Pricing

14-24
Price-Adaptation Strategies

Countertrade Discounts/ Allowances

• Barter • Cash discount
• Compensation deal • Quantity discount
• Buyback • Functional discount
arrangement • Seasonal discount
• Offset • Allowance

14-25
Promotional Pricing Tactics
• Loss-leader pricing
• Special-event pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties and
service contracts
• Psychological
discounting

14-26
Differentiated Pricing and
Price Discrimination
• Customer-segment
pricing
• Product-form pricing
• Image pricing
• Channel pricing
• Location pricing
• Time pricing
• Yield pricing

14-27
Table 14.5 Profits Before and
After a Price Increase

14-28
Increasing Prices

Delayed quotation pricing

Escalator clauses

Unbundling

Reduction of discounts

14-29
Figure 14.7 Price-Reaction Program for Meeting
Competitor’s Price Cut

14-30
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

14-31
Marketing Debate

 Is the right price a fair price?

Take a position:
1. Prices should reflect the value that
consumers are willing to pay.
2. Prices should primarily just reflect the cost
involved in making a product.

14-32
Marketing Discussion

 As a consumer, which pricing

method do you personally
prefer to deal with? Why?

14-33