applied marketing
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Applied marketing. Session 5. Yummy Bar 12.50 kc. Choco -Bar 9.90 kc. What does Price do?. Names Terms of Exchange Signifies Quality Shapes the Value of the Product How? Motivating consumer to rethink and better understand what they are being offered. - PowerPoint PPT PresentationTRANSCRIPT
APPLIED MARKETING
Session 5
Yummy Bar 12.50 kc Choco-Bar 9.90 kc
What does Price do? Names Terms of Exchange Signifies Quality Shapes the Value of the Product
How? Motivating consumer to rethink and better
understand what they are being offered
What you need to know before determining price
1. Costs 2. Competitors 3. Customers and Value4. Corporate Strategy
Slide 16.5
Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009
The 3 C’s and Pricing Models
Models: Markup pricing Going-rate pricing Perceived-value
pricing Value pricing Premium pricing Auction-type
pricing
Costs (costs plus or markup)
= Product Cost
Analyze competitors’ costs, prices and offers
Consider the nearest competitor’s price Evaluate worth to customer for
differentiated features Judge whether the customer will be
willing to pay more Anticipate response from competition –
what would you do in competition’s place?
Where do customers perceive value?
Features Buyer’s image of
product performance
Ability to deliver on time
Warranty
Customer support Supplier reputation Trustworthiness
and Reliability Esteem End user of the
product
Slide 16.9
Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009
Strategic Decisions: the pricing objective
Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership
Porter’s Generic StrategiesTarget Scope
Competitive Advantage
Low Cost Product Uniqueness
Broad (industry wide)
Overall Cost Leadership Differentiation
Narrow(market segment)
Cost Focus Differentiation Focus
Price-adaptation strategies
Geographical pricing
Discounts/allowances
Differentiated pricing
Promotional pricing
Bundle pricing
Communicating with Customers by Using Price
Commodification = Products become “commodities” Skepticism, routinized behavior, minimal
expectations, prefer swift and effortless transactions
All product dimensions are equally palatable, differences are not worth investigating
Not about products, but about customers (vs. actual commodities)
Objective is to reengage buyer who is past caring
Tires, Explosives, Car Insurance
Using Price – Change Parameters Adjust price structure to clarify
advantages Move away from “units sold” model Examples
Goodyear, price on “miles/km” expectation, rather than engineering
Orica, price on fragmentation of rock rather than explosive
Norwich Union, insurance based on miles driven, rather than risk
Using Price - Overpricing Thought-provoking effect of moderate
overpricing (50% to 80%) Consumer: “Why is this so much more
expensive?” Revives considerations and recall of
other features Apple computers, Starbucks, etc.
Using Price - Partitioning Use partitioning to highlight overlooked
benefits Showing broken down pricing can cause
consumers to revise behavior Unbundling
Cable television (channels, set top box, internet)
Low cost airlines (flight, luggage, food)
Using Price – Single Price Point Customer focuses on choice, rather than
price Swatch -- which is right for me? iTunes
Varying $0.89 to $1.29 Uniform $1.29
Likelihood of Purchase (1 to 5) 2.77 3.63
Songs per month 5.05 6.13
Implied annual revenue $25.95 $49.10
Using Price – Free Power of Free Free $10 gift certificate, or seven dollars
for a $20 gift certificate Amazon France
Shipping for 1 Franc (vs. free)
Slide 16.18
Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009
Presenting the price
Anchoring Use a comparison
TiVo (VCR vs. Computer)
$200 vs. $1000 Apple iPhone
$600 to $400 Anchor high value
Price Cues ‘Left to right’ pricing
($299 versus $300) Odd number
discount perceptions vs. Even number value perceptions
‘Sale’ written next to price
Limited availability
What is a brand?
A brand is a name, term, sign, symbol or design or a combination of them,
intended to identify the goods or services of one seller or group of
sellers and to differentiate them from those of competitors.
Most Valuable Global Brands
Distinguishing between brand identity and brand image
Brand identity is the way a company aims to identify or position itself or its product or service; the visual or verbal expressions of a brand which leads to the psychological or emotional associations that the brand aspires to maintain in the minds of the consumer.
Brand image is the way the public actually perceives this aim.
The role of brands – for firms (1)
Legal protection
Create loyalty
Serve as a competitive advantage
Secure price premium
The role of brands – for firms (2)
Increase marketing efficiency
Attract employees
Elicit support from channel partners
Help segment markets
The role of brands – for customers
Signify quality level
Facilitate purchasing
Reduce risk