1 Pricing Strategies BBI2 – Introduction to Business Adapted from an original PPT by Sameer...
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Transcript of 1 Pricing Strategies BBI2 – Introduction to Business Adapted from an original PPT by Sameer...
1
PricingPricingStrategiesStrategies
BBI2 – Introduction to BusinessAdapted from an original PPT by
Sameer Mathur, Ph.D.Assistant Professor (Marketing), McGill University
PricePrice
Many NamesMany Names
Low High
Low
High
EconomyPricing
Market Penetration
Market Skimming
PremiumPricing
Price
Quality
Pricing StrategiesPricing Strategies
Market SkimmingMarket Skimming
Applies to new, distinctive products, Applies to new, distinctive products, early in the Product Life Cycleearly in the Product Life Cycle
Market SkimmingMarket Skimming
•Most consumer electronic products
•The iPod was priced $259 in 2004.
Captive Product PricingCaptive Product Pricing
Two Pricing MistakesTwo Pricing Mistakes
Economy Economy PricingPricing
PremiumPremiumPricingPricing
Price Adjustment StrategiesPrice Adjustment Strategies
• Discount / allowance • Segmented• Psychological• Promotional
• Types of discounts– Cash discount– Quantity discount– Seasonal discount
• Allowances– Trade-in allowances– Promotional allowances
StrategiesStrategies
Quantity Discounts in Public TransportQuantity Discounts in Public Transport
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Two-part TariffsTwo-part Tariffs
Total Price = Retail Price + Shipping PriceTotal Price = Retail Price + Shipping Price
Seasonal Seasonal DiscountDiscount
ss
Trade Trade In In
(Pure) Bundling(Pure) Bundling
(Mixed) (Mixed) BundlingBundling
Price Adjustment StrategiesPrice Adjustment Strategies
• Discount / allowance • Segmented• Psychological• Promotional
• Types of segmented pricing strategies:– Product-line pricing– Location pricing– Time pricing
• Also called revenue or yield management
• Certain conditions must exist for segmented pricing to be effective
StrategiesStrategies
Pricing a Pricing a Product-Line Product-Line
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Product Lines in IndiaProduct Lines in India
High Quality
Low Quality
Toyota Corolla Altis
Toyota Camry W1
Time Pricing Time Pricing
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Student Discounts Student Discounts in Public Transportin Public Transport
Segmented Pricing EffectivenessSegmented Pricing Effectiveness
– Market must be “segmentable”– Segments must show different demand– Pricing must be legal– Costs of segmentation cannot exceed revenues
earned– Segmented pricing must reflect real differences in
customers’ perceived value
Price Adjustment StrategiesPrice Adjustment Strategies
• Discount / allowance • Segmented• Psychological• Promotional• International
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• The price is used to say something about the product.– Price-quality relationship– Reference prices– Differences as small as five
cents can be important– Numeric digits may have
symbolic and visual qualities that psychologically influence the buyer
StrategiesStrategies
Psychological Psychological
PricingPricing
Psychological PricingPsychological Pricing
This ad for a luxury priced car attempts
to show that Mercedes owners
form important relationships with
their cars
Price Adjustment StrategiesPrice Adjustment Strategies
• Discount / allowance • Segmented• Psychological• Promotional
• Temporarily pricing products below the list price or even below cost– Contracts, Special-event
pricing– Cash rebates– Low-interest financing,
warranties– Loss leaders
StrategiesStrategies
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Promotional Cellphone PricingPromotional Cellphone PricingPPRROOMMOOTTIIOONNAALL
PPRRIICCIINNGG
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No Promotional PricingNo Promotional Pricing
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Loss LeaderLoss Leader
No Loss Leader => Every Day Low PricingNo Loss Leader => Every Day Low Pricing34
Promotional Pricing - ChallengesPromotional Pricing - Challenges
–Easily copied by competitors–Creates deal-prone
consumers–Erode brand value–Industry Price Wars