INTRODUCTION TO 7 P’S
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Transcript of INTRODUCTION TO 7 P’S
INTRODUCTION TO 7 P’SINTRODUCTION TO 7 P’S
PRICE & PLACEPRICE & PLACE
Factors considered in Pricing a ServiceFactors considered in Pricing a Service
CostCost CompetitionCompetition Strategic Considerations/ ObjectivesStrategic Considerations/ Objectives
Increase Market share- Penetrative PricingIncrease Market share- Penetrative Pricing Build exclusive brand image- Skimming PricingBuild exclusive brand image- Skimming Pricing
Demand Variations, Capacity ConstraintsDemand Variations, Capacity Constraints Differential PricingDifferential Pricing Complementary ServicesComplementary Services ReservationsReservations Part-time employeesPart-time employees Increased consumer participationIncreased consumer participation
Short-term Pricing TacticsShort-term Pricing Tactics
Price Price TacticsTactics
ObjectivesObjectives Forms/examplesForms/examples
Differential Differential PricingPricing
Even-out fluctuations in Even-out fluctuations in DemandDemandBuild demand during Build demand during non-peak timenon-peak time
Price time Price time differentialsdifferentialsCustomer AbilityCustomer AbilityPlace DifferentialsPlace Differentials
Discount Discount PricingPricing
Encourage actions like Encourage actions like early payments, bulk early payments, bulk purchases or peak usagepurchases or peak usage
Price-offsPrice-offs
Limited offersLimited offers
Short-term Pricing TacticsShort-term Pricing Tactics
DiversionaryDiversionary
PricingPricingMake customer visit facility Make customer visit facility at least once to avail basic at least once to avail basic service at discount & with service at discount & with that experience try out that experience try out othersothers
Car service Car service StationsStationsRestaurantsRestaurants
High Price High Price maintenancmaintenance pricinge pricing
Associate Price with qualityAssociate Price with qualityHold out against price Hold out against price threat of low price Sellersthreat of low price Sellers
AirlinesAirlinesHospitalityHospitality
Loss Leader Loss Leader PricingPricing
To charge a reduced price To charge a reduced price for first order with a hope to for first order with a hope to get further business at get further business at better pricebetter price
Restaurant Restaurant offering discount offering discount on day of on day of inaugrationinaugration
Foundations for Setting PricesFoundations for Setting Prices
The Pricing TripodThe Pricing Tripod Cost - minimum price or floorCost - minimum price or floor Customer’s Perceived value - maximum Price Customer’s Perceived value - maximum Price
or Ceilingor Ceiling Competitors PriceCompetitors Price
Cost Based pricingCost Based pricing
Establishing the Cost of ServiceEstablishing the Cost of Service Fixed CostFixed Cost Variable costVariable cost Semi-variable costSemi-variable cost ContributionContribution Break-even pointBreak-even point
Activity based CostingActivity based Costing Identification of various activities Identification of various activities Determining the cost of each activityDetermining the cost of each activity
Value- Based PricingValue- Based Pricing
Understanding Net ValueUnderstanding Net Value Enhancing Gross valueEnhancing Gross value
Pricing Strategies to reduce uncertaintiesPricing Strategies to reduce uncertainties Relationship PricingRelationship Pricing Low-Cost LeadershipLow-Cost Leadership Managing the perception of ValueManaging the perception of Value
Reducing related monetary & non monetary Reducing related monetary & non monetary costcost Time cost, physical cost, psychological cost & Time cost, physical cost, psychological cost &
Sensory costSensory cost
Competition – Based pricingCompetition – Based pricing
Price leadershipPrice leadership Price Bids & NegotiationsPrice Bids & Negotiations
Pricing Strategy How much to Charge?
Cost, Competition, Consumer Demand What Should be the basis of pricing?
Based on completion of Task Based on admission to a Service performance Time Based Tied to consumption of physical resources
Pricing Strategy
How should payment be made? Cash, Credit / debit cards, Directed towards third party
Where should the payment be made?
To whom should the payment be made
Communicating Prices to the target market
Place- Third P
Location is considered to be the key for successful marketing of services
Customers are present at the same place where the services are “manufactured” & “delivered”. (Intangibility, Inseparability)
Research indicates consumer prefer conveniently located supplier of service over the best service provider far away
Distribution
Distribution embraces three interrelated element Information & Promotion flow Distribution of information &
promotion materials relating to service offers
Negotiation flow Focuses on reaching an agreement on service features & configuration & terms of offer so that purchase contract could be closed
Product flow Many services, especially those involving people & possession processing require physical facilities for delivery
For information- processing services (internet banking, entertainment etc) product flow can be undertaken via electronic channel
Type of Contact: Option for service delivery
Nature of Interaction Availability of service outlets
Customer goes to service organization
Theater, Bus service, fast-food chain
Service organization comes to Customer
House painting, mail delivery
Customer & service organization transact at arm’s length
Credit card company, telephone company, broadcast network
Transcending physical constraints of location
Franchised Outlets Co- marketing or sharing resources with product
or service partnersEg. Syndicate Bank & Bajaj Allainz, Corporation
Bank & New India assurance Company Petroleum Retail outlets Agents & Distribution Partners
Channel Management Issues
Serving Customers efficiently Ensuring Viability & Profitability of Channel
Partners Managing potential conflicts among multiple
channels