Strategic marketing 9edi.chapter11
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Transcript of Strategic marketing 9edi.chapter11
1. Imperatives for Market-Driven Strategy
2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
Strategic Marketing
Strategic Role of Price
Analyzing the Pricing Situation
Selecting the Pricing Strategy
Determining Specific Prices and Policies
CHAPTER 11PRICING STRATEGY
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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Pricing Decisions are Creating Major Challenges for Many
CompaniesExamples Include:
Threats to major airlines by discount carriers. Pressures on drug companies to reduce prices. Intense price competition on supermarket chains by Wal-Mart and Costco. Aggressive discounting by U.S. automobile producers to retain market share. Threats to strong brands by counterfeit products.
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…requires that we put pricing at the beginning
of the process. For example, a multi-part
marketing strategy usually is required in value-
based pricing. Airlines’ complicated service
packages with arcane restrictions, and their
multiple channels of distribution must support
pricing that reflects different values of the
service to different segments. Without such a
strategy, airlines would capture a much smaller
portion of the value they have the potential to
create. T. Nagle, Marketing News, 11/9/98, 4.
STRATEGIC ROLE OF PRICE
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Price in the Positioning Strategy
Positioning StrategyProductstrategy
Targetmarket andobjectives
Value-Chainstrategy
Pricingstrategy
Promotionstrategy
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Pricing Situations
New product pricing
Life cycle pricing
Changing positioning strategy
Countering competitive threats
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Various Roles of Pricing
Signal to the Buyer
Instrument of Competition
Improving Financial
Performance
Marketing Program
Considerations
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Pricing Strategy for New and Existing Products
Set PricingObjectives
Analyze thePricing Situation
Select PricingStrategy
Determine SpecificPrices and Policies
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Examples of Pricing Objectives
Gain market position
Achieve financial performance
Product positioning
Stimulate demand
Influence competition
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Customer Price Sensitivity
Pricing
Objectives
Competitors’ Likely Responses
Analyzing the Pricing Situation Product
Costs
ANALYZING THE PRICING SITUATION
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Customer Price Sensitivity
1. How large is the product-market in terms of buying potential?
2. What are the market segments and what market target strategy is to be used?
3. How sensitive is demand in the segment(s) to changes in price?
4. How important are nonprice factors, such as features and performance?
5. What are the estimated sales at different price levels?
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Buyers’ Perceptions of Value Offeringsof Brands A-E
PerceivedValue
Perceived Price
Superior Value Zone
D A
C
EB
Inferior Value Zone
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Cost Analysis for Pricing Decisions
• Determine the components of the cost of the product.
• Estimate how cost varies with the volume of sales.
• Analyze the cost competitive advantage of the product.
• Decide how experience in producing the product affects costs.
• Estimate how much control management has over costs.
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Competitor Analysis
Which firms represent the most direct competition
Competitor’s positioning on a relative price basis
Competitors’ success with their pricing strategies
Competitors’ probable responses to alternative price strategies
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SELECTING THE PRICING STRATEGY
How much flexibility exists?
How to position price relative to costs?
How visible to make the price of the product?
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Determinants of Pricing Flexibility
Demand
Costs
Demand-Cost GapCompetitionPricing Objectives
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Price too high; little or no demand
Price Floor
Price Ceiling Nature of demand in target market
Business and marketing strategy
Product differentiation
Competitors’ prices
Prices of substitutes
Product costs
Range o
f fe
asi
ble
pri
ces
Price too low; no profit possible
Determining Feasible Prices
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AboveCompetition
BelowCompetition
Skim strategy
Neutral strategy(same as competition)
Penetration strategy
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Diplomacy rather than force
Select competitive confrontations
Signaling
Competitive Pricing Issues
Target segments instead of
volume
Source: Thomas T. Nagle, “Price Competition,” Marketing Management, Vol. 2, No. 1, 38-45.
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Low-active
strategy
High-active
strategy
Low-passivestrategy
High-passivestrategy
Activestrategy
Passivestrategy
Highrelativeprice
Lowrelativeprice
Illustrative Price Strategies
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DETERMINING SPECIFIC PRICES AND POLICIES
Selecting Specific Prices
Policies to Manage Pricing Strategy
Special Pricing Issues
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Basis of DeterminingSpecific Prices
Cost CompetitionDemand
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Establishing Pricing Policy and Structure
Policy
Discounts, allowances, returns, and other operating guidelines
Pricing Structure
Product mix and line pricing relationships
How individual items in the line are priced in relation to one another
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Managing Pricing StrategyManaging Pricing Strategy
1.1. The more that the competitors and customers know about your The more that the competitors and customers know about your pricing, the better off you are. In an information age, it is necessary to pricing, the better off you are. In an information age, it is necessary to be transparent about prices and the value of a firm’s offerings.be transparent about prices and the value of a firm’s offerings.
2.2. In highly competitive markets, the focus should be on those market In highly competitive markets, the focus should be on those market segments that provide opportunities to gain competitive advantage. segments that provide opportunities to gain competitive advantage. Such a focus leads to a value-oriented pricing approach.Such a focus leads to a value-oriented pricing approach.
3.3. Pricing decisions should be made within the context of an overall Pricing decisions should be made within the context of an overall marketing strategy that is embedded within a business or corporate marketing strategy that is embedded within a business or corporate strategy.strategy.
4.4. Successful pricing decisions are profit oriented, not sales volume or Successful pricing decisions are profit oriented, not sales volume or market share oriented.market share oriented.
Source: Adapted from Kent B. Monroe, Pricing, 3rd ed. (Burr Ridge, IL.: McGraw-Hill/Irwin, 2003) 624-6.
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5.5. Prices should be set according to customers’ perceptions Prices should be set according to customers’ perceptions of value.of value.
6.6. Pricing for new products should start as soon as product Pricing for new products should start as soon as product development begins.development begins.
7.7. The relevant costs for pricing are the incremental avoidable The relevant costs for pricing are the incremental avoidable costs.costs.
8.8. A price may be profitable when it provides for incremental A price may be profitable when it provides for incremental revenues in excess of incremental costs.revenues in excess of incremental costs.
9.9. A central organizing unit should administer the pricing A central organizing unit should administer the pricing function. Generally, it is better to avoid letting salespeople function. Generally, it is better to avoid letting salespeople set price, especially without access to profitability set price, especially without access to profitability information and specific training in pricing and revenue information and specific training in pricing and revenue management.management.
10.10. Pricing management should be viewed as a process and Pricing management should be viewed as a process and price setting as a daily management activity, not a once-a-price setting as a daily management activity, not a once-a-year activity.year activity.
Managing Pricing StrategyManaging Pricing Strategy
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Special Pricing Situations
Price Segmentation
Value Chain (Distribution Channel) Pricing
Price Flexibility
Product Life Cycle Pricing