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8/12/2019 Kotler POM13e Instructor 10 - Global Revised
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Chapter 10- slide 1Copyright 2009 Pearson Education, Inc.Publishing as Prentice Hall
Chapter Ten
Pricing:Understanding and Capturing
Customer Value
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Chapter 10- slide 2Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Pricing:Understanding and
Capturing Customer Value
What Is a Price?
Customer Perceptionsof Value
Company and ProductCosts
Other Internal andExternalConsiderationsAffecting PriceDecisions
Topic Outline
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Chapter 10- slide 3Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Price is the amount of money charged for a
product or service. It is the sum of all thevalues that consumers give up in order togain the benefits of having or using aproduct or service.
What Is a Price?
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Chapter 10- slide 4Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Price is the onlyelement in themarketing mixthat producesrevenue; all otherelementsrepresent costs
What Is a Price?
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Chapter 10- slide 5Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Is the understanding ofthe value consumersplace on the benefitsthey receive from the
product and setting aprice that captures thatvalue
Customer Perceptions of Value
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8/12/2019 Kotler POM13e Instructor 10 - Global Revised
7/35Chapter 10- slide 7Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Value-based pricing : pricing a product or a
service by depending on costumerexpectations, not the sellers cost. Price isconsidered before the marketing programis set.
Value-based pricing is customer driven Cost-based pricing is product driven
Customer Perceptions of Value
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Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Customer Perceptions of Value
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8/12/2019 Kotler POM13e Instructor 10 - Global Revised
10/35Chapter 10- slide 10Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Good-value pricing offers the rightcombination of quality and good serviceto fair price
Existing brands are being redesigned to offermore quality for a given price or the samequality for less price
Customer Perceptions of Value
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Chapter 10- slide 11Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Everyday low pricing (EDLP) involvescharging a constant everyday low pricewith few or no temporary price discounts
High-low pricing involves charging higher
prices on an everyday basis but runningfrequent promotions to lower pricestemporarily on selected items
Customer Perceptions of Value
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Chapter 10- slide 12Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Value-added pricing attaches value-addedfeatures and services to differentiate theirproducts, support higher prices, and buildpricing power
Pricing power is the ability to have acompetitive advantage that justify higherprices and margins without losing market
share
Customer Perceptions of Value
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Chapter 10- slide 13Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Cost-based pricing involves setting pricesbased on the costs for producing,distributing, and selling the product plus afair rate of return for its effort and risk
Cost of raw materials & production + littleprofits
Company and Product Costs
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Chapter 10- slide 14Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Cost-based pricing adds a standard markup(profit) to the cost of the product
Company and Product Costs
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Chapter 10- slide 15Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Fixedcosts
Variablecosts
Totalcosts
Company and Product CostsTypes of costs
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Chapter 10- slide 16Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Fixed costs are the costs that do not vary
with production or sales level Rent
Heat
Interest
Executive salaries
Company and Product Costs
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Chapter 10- slide 17Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Variable costs are the costs that vary withthe level of production
Packaging
Raw materials
Company and Product Costs
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Chapter 10- slide 18Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Total costs are the sum of the fixed andvariable costs for any given level ofproduction
Average cost is the cost associated with agiven level of output
Company and Product Costs
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Chapter 10- slide 19Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Costs at Different Levels of Production
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Chapter 10- slide 20Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Experience or learning curve is when average cost falls asproduction increases because fixed costs are spread overmore units
Costs as a Function of Production Experience
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Chapter 10- slide 21Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Cost-plus pricing adds a standard markup tothe cost of the product
Benefits Sellers are certain about costs
Prices are similar in industry and price competition isminimized
Consumers feel it is fair
Disadvantages Ignores demand and competitor prices
Cost-Plus Pricing
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Chapter 10- slide 22Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Break-even pricing is the price at which total
costs are equal to total revenue and thereis no profit
Target profit pricing is the price at which thefirm will break even or make the profit itsseeking
Break-Even Analysis and Target ProfitPricing
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Chapter 10- slide 23Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider When
Setting PricesBreak-Even Analysis and Target Profit Pricing
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Chapter 10- slide 24Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Considerations in Setting Price
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Chapter 10- slide 25Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Customer perceptionsof value set the upperlimit for prices, andcosts set the lowerlimit
Companies mustconsider internal andexternal factors whensetting prices
Other Internal and External ConsiderationsAffecting Price Decisions
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Chapter 10- slide 26Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Target costing starts with an ideal sellingprice based on consumer valueconsiderations and then targets costs thatwill ensure that the price is met
Other Internal and ExternalConsiderations Affecting PriceDecisions
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Chapter 10- slide 27Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Organizational considerations include:
Who should set the price
Who can influence the prices
Other Internal and External ConsiderationsAffecting Price Decisions
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Chapter 10- slide 28Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Before setting prices,the marketer mustunderstand therelationship betweenprice and demand forits products
Other Internal and ExternalConsiderations Affecting PriceDecisions
The Market and Demand
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Chapter 10- slide 29Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Pure competitionMonopolistic competition
Oligopolistic competitionPure monopoly
Other Internal and External Consideration AffectingPrice Decisions
Competition
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Chapter 10- slide 30Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
The demand curve shows the number of units the marketwill buy in a given period at different prices
Normally, demand and price are inversely related Higher price = lower demand For prestige (luxury) goods, higher price can equal higher
demand when consumers perceive higher prices ashigher quality
Other Internal and ExternalConsiderations Affecting Price
Decisions
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Chapter 10- slide 31Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Other Internal and External ConsiderationsAffecting Price Decisions
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Chapter 10- slide 32Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Price elasticity of demand illustrates the response of demand to achange in price
Inelastic demand occurs when demand hardly changes when there is asmall change in price
Elastic demand occurs when demand changes greatly for a small change inprice
Price elasticity of demand = % change in quantity demand% change in price
Other Internal and ExternalConsiderations Affecting PriceDecisions
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Chapter 10- slide 33Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to Consider WhenSetting Prices
Comparison of offering interms of customer value
Strength of competitors
Competition pricing strategies Customer price sensitivity
Other Internal and External ConsiderationsCompetitor's Strategies
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Chapter 10- slide 34Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall
Factors to ConsiderWhen Setting Prices
Economic conditions
Resellers response toprice
Government
Social concerns
Other Internal and External ConsiderationAffecting Price Decisions
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Ch 10 lid 35Copyright 2010 Pearson Education Inc
All rights reserved. No part of this publication may be reproduced, stored in aretrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright 2010 Pearson Education, Inc.Publishing as Prentice Hall