session 11 pricing a - fudan universityfdjpkc.fudan.edu.cn/_upload/article/files/ac/6b/... · ©...

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MarketingManagementSession11

QianXU,PhD.Spring,2017

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Today’sagenda

•Review•Pricing:theoryandpractice•Pricingtricks

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Part1Review

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Lasttwoweeks

•1.1NewProductDevelopment•1.2Conjointanalysis•1.3Servicevs.Good

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1.1 ProductlifecircleIBM Dell

&HP

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1.1.1Typesofnewproduct

Types Apple exampleanew-to-the-worldproduct iPhoneanewproductline Macbook Airanadditiontotheexistingproductline iPhoneSEanimprovementofexistingproduct iPhone 6sarepositioningofanexistingitem iPhoneRose

Gold

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1.1.2Whyisnewproductdevelopmentnecessary?

CompetitionAdaptation

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1.1.3 Howtodonewproductdevelopment

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1.1.4Whotodevelopthenewproduct

•R&Ddepartmentisincharge•MKTdepartmentgetsinvolvedintheearlystageofnewproductdevelopment.

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1.1.5Whichcomesfirst?Marketvs.Product?

•Marketfirst:•Benefit:Noneedtoworryaboutthedemandsize•Cost:Maymissthechancetoinventrevolutionaryproduct

•Productfirst:•Benefit:Pioneeringadvantage•Cost:Educatecustomers,greaterriskoffailure.

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1.2Conjointanalysis(联合分析)

CONsider attributesJOINTly

•PaulE.Green(1978)

•Green, P. and Srinivasan, V. (1978) Conjoint analysis in consumer research: Issues and outlook, Journal of Consumer Research, vol 5, September 1978, pp 103–123.

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1.2.1Whatconjointanalysiscando?

• Newproductdevelopment• Pricing

Utilityofeachlevelforeachattribute

• Newproductdevelopment• STP

Relativeimportanceofeachattribute

• Newproductdevelopment• Marketstrategy

Marketsharesimulation

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1.2.2Basiclogic

• Bymanycomparisons,wemanagetocalculatetherelativeutilityofeachlevelforeachattribute.

Utilityofeachlevelforeachattribute

• Thebiggertheutilityrangeis,themoreimportantthisattributeis.

Relativeimportanceofeachattribute

• Thelargerthetotalutilityforoneproduct,thelargerthemarketshareitwillgain.

Marketsharesimulation

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1.3 ServiceMix

Puregood Majorgood Hybrid Majorservice

Pureservice

One-timeexchange

Computer

Restaurant

Airplane

Massage

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1.3.1Servicevs.Good

intangibility inseparability

variability perishability

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1.3.2 Whenservicefails

Respondfast

Admitmistakes

Providesolutions

Longtermvision

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MarketingMix:4P

Product Price Promotion Place

STP

Segmentation Targeting Positioning

MarketingAnalysis:5C

Customer Company Competition Collaborator Context

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Today’sobjectives

•Toknow:Whatisprice?•Tounderstand:Whyispriceimportant?•Toact:Howtopricing?

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Part2Pricing:theoryandpractice

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Howmuchshouldanengagementringcost?

A DiamondisForever钻石恒久远，一颗永流传

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2.1Definition

•Priceistheratioofthequantitiesofgoods/services thatareexchangedforeachother.

•Formsofprice•Currency•Mileage/point•Credit•Punishment

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2.1.1FormsofpriceCurrency

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2.1.1FormsofpriceCurrency

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2.1.1FormsofpriceMileage/Point

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2.1.1FormsofpriceCredit

A,B,C,D,&F

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2.1.1FormsofpricePunishment

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2.2 Whyispriceimportant?

•For sellers•Forbuyers

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2.2.1Forsellers

priceless=worthless?无价之宝＝没有价值？

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2.2.2 Forbuyers

PriceUtility

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Beforecurrencyoccurred

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Total: $1,000,000

99%OFFCOUPON

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2.3Howtopricing?

Set up objectives

Determine demand

Estimate costs

Analyzing competitors

Select a pricing method

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2.3.1 Objectivesofpricing

•Survival•Maximumcurrentprofit•Maximummarketshare•Maximummarketskimming•Product-qualityleadership

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1)Objectivesofpricing:survival

Doessurvivalobjectiverequirelowprice?

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2) Objectivesofpricing:Maximumcurrentprofit

Doesmaximumcurrentprofitrequirehighprice?

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3) Objectivesofpricing:Maximummarketshare

Doesmaximummarketsharerequirelowprice?

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4) Objectivesofpricing:Maximummarketskimming

Good• Lesscompetitors

• Superiorproduct

Bad• Fatalifcompetitor'spriceislow

• Consumersmaybeunhappy

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5) Objectivesofpricing:Product-qualityleadership

Ishighpriceequaltohighquality?

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Luxurybags

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2.3Howtopricing?

Set up objectives

Determine demand

Estimate costs

Analyzing competitors

Select a pricing method

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2.3.2 Pricesensitivity

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2.3.2Howtocalculatepricesensitivity

•Survey•Priceexperiment•Statisticalanalysis

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2.3.2.1Survey

•Howmuchwouldyouliketopayforamarkcup?

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2.3.2.1Survey

•VanWestendorp’s pricesensitivitymeter•Gabor-Grangerdirectpricingtechnique•Conjointanalysis

https://www.qualtrics.com/market-research/pricing-research/

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1)VanWestendorp’s pricesensitivitymeter

• Atwhatpricewouldyoubegintothinktheitemis tooexpensive toconsider?• Atwhatpricewouldyoubegintothinktheitemis soinexpensive thatyouwouldquestionthequalityandnotconsiderit?

• Atwhatpricewouldyoubegintothinktheitemis gettingexpensive,butyoustillmightconsiderit?

• Atwhatpricewouldyouthinktheitemisa bargain – agreatbuyforthemoney?

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Q1- Pleaseindicateyouropinionsoverthepriceforamarkcup(马克杯,inRMB)

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

8 10 12 14 16 18 20

TooexpensiveToocheapExpensiveCheap

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IPP

PMEPMC

OPP

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VanWestendorp’s pricesensitivitymeter• Theindifferencepricepoint(IPP):the(median)“normal”priceinthemarketorthepriceofamarketleader.

• Theoptimalpricepoint(OPP):The“sweetspot”wherethenumberofpeoplewhofindthepriceacceptableismaximized,andresistancetopricechangesisminimized

• Pointofmarginalcheapness(PMC):thepointwheretoocheapcrossesnotcheap

• Pointofmarginalexpensiveness(PME):thepointwheretooexpensivecrossesnotexpensive

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2)Gabor-Grangerdirectpricingtechnique

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3)Conjointanalysis

51

Attributes

Levelsforeachattribute

Twoproductprofiles

Atypicalchoicetask

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2.3.2.2 Peoplearelesspricesensitivewhen

•Therearefewornosubstitutesorcompetitors;•Theydonotreadilynoticethehigherprice;•Theyareslowtochangetheirbuyinghabits;•Theythinkthehigherpricesarejustified;•Priceisonlyasmallpartofthetotalcostofobtaining,operating,andservicingtheproductoveritslifetime.

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1)Fewornosubstitutesorcompetitors

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2)Donotreadilynoticethehigherprice

15 RMB

10.2 RMB

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3)Slowtochangetheirbuyinghabits

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4)Thinkthehigherpricesarejustified

•Luxurybrand•Uniquedesign•Limitededition

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5)Priceisjustasmallpart

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2.3.3Howtopricing?

Set up objectives

Determine demand

Estimate costs

Analyzing competitors

Select a pricing method

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2.3.3TypesofCosts

Fixed Costs

Costs that don’tvary with sales or production levels.

Executive SalariesRent

Variable Costs

Costs that do varydirectly with the

level of production.

Raw materials

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2.3.4Howtopricing?

Set up objectives

Determine demand

Estimate costs

Analyzing competitors

Select a pricing method

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Cananyproducthavenocompetitors?

Debate

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2.3.5Howtopricing?

Set up objectives

Determine demand

Estimate costs

Analyzing competitors

Select a pricing method

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Pricingmethod

Orientation Pricing methodCost • MarkupPricing

• TargetReturnPricingValue • PerceivedValuePricing

• ValuePricingCompetition • Going-RatePricing

• Sealed-BidPricing• Auction

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2.4Teampractice:Pricing

•Requirements:•Pricingforyournewsmartphone•Handitinbytheendofthisclass•Gradedbyme,nopresentation.

•Evaluationcriteria:•Correctnessofunderstandingconcepts

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Part3Pricingtricks

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3.Psychologyofpricing

•Referencepoint•Price-qualityassociation•Priceendings•Howtochangeprices

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3.1Referencepoint

5000RMB/m

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3.1Referencepoint

6000RMB/m

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LaoLuo

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3.2Priceendings

Leftanchoring:

1.99vs2.00

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3.2Priceendings

Specificending:

20,372vs20,000

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3.3Howtochangeprices

•Whenyouwanttoincreaseprice•Whenyouwanttodecreaseprice

Price Cost

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3.3.1Whenyouwanttoincreaseprice

•Addsomethingnewtoyourproducts•e.g.,haveyouevernoticediPhoneincreasesitsprice•8G→16G→64G

•Reducesomethingfromyourproducts

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3.3.2Whenyouwanttodecreaseprice

•Decreasethepriceifyourcustomersarepricesensitive.

•Ifnot,increasetheportionofyourproducts•e.g.,100for1yearinsurance,now15months

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PS4

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1)Wantithardtonoticethechange?

•Doitinmultipledimension

Sameprice7’→6’

70→60RMB

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2)Wantiteasytonoticethechange?

1 2

•Doitinsingledimension

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Afterclass

• ReadChapter14• Quiz3:Jun.7,Chapters11-14&20(Quizzedchapterswon’tappearinfinalexam)• Termprojectpresentationschedule(markedinE-learning’sschedule)

Date I IIMay.24 1 8May.31 6 3Jun.7 2 5Jun.14 4 7