Price Adaptation Strategy

8/11/2019 Price Adaptation Strategy

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Group 1

introducing

PRICE ADAPTION

STRATEGIES


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PROMOTIONAL Pricing

reducing the price of a product or service temporarily to attract customers anddevelop loyalty for increased future revenue and profit


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PROMOTIONALPricing

When is it done?This is sometimes done because the sales of the product are falling andthe firm wants to renew customer's interest in it. Or perhaps theproduct has gone out of fashion, and the firm wants to clear their stock.

Examples:

Buy-one-get-one-free scheme50-70% discount

This technique may be used by retailers or producers alike.When it is used by retailers, the goal is generally to attract

attention to the business and to attract regular customers.When the technique is used by producers, the goal is generallyto attract customers to a product or brand and to encourage

brand loyalty.


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TYPES ofPROMOTIONAL

PRICING

SALE

SPECIAL EVENTPRICING

CASH REBATES

LOW INTERESTFINANCING

And WARRANTIES and SERVICE CONTRACTS


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S A L E

aims to provide a short-term boost to sales sales promotion looks for alternatives that are more cost-effective -

costing less to implement but providing a bigger increase in sales Sales promotion is needed to attract new customers, to hold present

customers, to counteract competition, and to take advantage ofopportunities .

often drop prices on branded products to promote their stores' sales A temporary reduction in the price, such as 50% off.


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S P E C I A L E V E N T

P R I C I N G

Pricing that is 'special' (or lowered) for special events such asChristmas, Easter, Valentine's Day, Mother's Day, Super Bowl,Thanksgiving and Back to School.

involves advertised sales or price cutting that is linked to a holiday,season, or event

A limited time sale price


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C A S H R E B A T E S

Cash rebates work like manufacturer coupons, with a twist. Rebatesoffer discounts on products you purchase, but some rebates haveterms that require you to take a few extra steps to reap the savings.

Sell for list price but offer discount via cash back OBJECTIVE: Maintain list price; offer appearance of a deal; reduce

cost of discount by % of buyers who do not pursue the rebateprocedure

Cash rebates allowed by auto manufacturers and some consumergoods manufacturers within a specified time period.

Such as a rebate or allowance when buying a homeand the seller offers a move-in allowance, or a carpetreplacement or renovation allowance or a rebate forall cash, no financing, and purchases of big ticket itemslike cars.

REBATE? An offer to consumers for a cash discounton the purchase of a consumer good. Therebate option may also be called "cashback", though the consumer will not actuallyreceive cash in hand - the "cash back" isused to directly reduce the purchase price.


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C A S H R E B A T E S


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L O W - I

N T E R E S T F I N A N C I N G

Low interest financing is provided on certain consumer goods likeautomobile, motorcycle, television, refrigerators, air conditioners

Maintain list price; attract more buyers via lower monthly paymentor even no-interest financing ; Seller pays part of interest cost


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W A R R A N T I E S a n d S E R V I C E

C O N T R A C T S

A common technique is adding a free, or low cost warranty to helpincrease sales.

This attract more buyers by reducing their perceived risk Buyers view these types of promotional prices very positively

because they believe it shows that the business has high confidencein the product's performance. Warranties and service contracts are provided on, especially, the

consumer goods like television, refrigerators, airconditioners,personal computers, etc


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DISCRIMINATORY Pricing

occurs when a business charges a different price to different groups of consumersfor the same good or service


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Price discrimination allows a company to earn higher profits thanstandard pricing

Example: Air fareEconomy seats = Php 10,000

First Class seats = Php 30,000


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Different Degrees of Price Discrimination

1. First Degree Price Discrimination

This involves charging consumers the maximum price that they are willing to pay.There will be no consumer surplus. (Price varies by customer)Example: Ukay-ukay; Car dealers2. Second Degree Price Discrimination This involves charging different prices depending upon the quantity consumed.(Price varies according to quantity sold)

Example: Safeguard soap (per box= P30) more expensive than 3-pid pack;Seaoil Protection Card (2008)Original Cost = PHP 58.0020 Liters of gas = PHP 1,070 (53.50 / per lr.)

3. Third Degree Price Discrimination This involves charging different prices to different groups of people. (Price variesby location or by customer segment)Example: Jeepney fare (Seniors and students fare = PHP 7.00) Orig. price=PHP 8.00


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IMAGEPRICING


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C U S T O M E R S E G M E N T P R

I C I N G Different customer groups are charged different prices for

the same product or service. For example, museums oftencharge a lower admission fee to students and senior citizens. (priceaccording to age, gender, interests, spending habits)

Price segmentation happens every day , perhaps you'veexperienced some of these examples:

Control brands, such as private label products vs. national brands

Customer segments, such as member vs. non-member prices forproducts and services.


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P R O D U C T F O R M P R I C I N G

Different versions of the same product are priced differently but notproportionately to the increase in costs

e.g.Microsoft sold different versions of its operating software Windows XP atdifferent price level. 'Windows Vista Home Basic Version' is sold at $200and with some variations the same operating software 'Windows VistaUltimate Version' is sold at $320


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I M A G E P R I C I N G

Some companies price the same product at two different levelsbased on image differences.

e.g.

A perfume manufacturer can put the perfume in one bottle, give it a nameand image, and price it at P110 an ounce. It can put the same perfume inanother bottle with a different name and image and price it at P220 anounce.


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L O C A T I O N P R I C I N G

Discriminatory pricing based on different locations, even thoughthe cost of offerings at each location is identical.

e.g.Theatre charges different prices for different audience preferences for

different locationsBuying goods at a supermarket vs. a gas station.


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T I M E P R I C I N G

Prices are varied by seasons, day or hours.

Time pricing is usually applicable in public utilities like electricity, telephonebills, hotels and airlines, and also for internet hours

e.g. Time based, as in hotels or attractions that are more or less expensive onweekdays or weekends.


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Any questions?THE END

Price Adaptation Strategy

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