1. Pricing products
Group members:
Pham Thi Hue
Nguyen Lan Anh
Phan Thi Thu Hien
Hoang Thuy Duong

2. outline
Factors affecting setting prices
I.
General pricing approaches
II.
New product pricing strategies
III.
Products mix pricing strategies
IV.
Price-adjustment strategies
V.
Price changes
VI.

3. Factors to consider when setting
prices
1. Internal
a. Marketing Objectives
b. Marketing mix strategy
c. Costs
d. Organizational considerations
2. External
a. Market & demand
b. Competition
c. Environmental elements

5. Internal
a. Marketing Objectives
Survival

Current profit maximization

Market share leadership

Product quality leadership


6. Product quality leadership:

Viettel telecom
One of three big people in Telecommunication
technology with price and promotion
campaign. Easy to use.

7. One of three big people in Telecommunicaton

technology with
Cheap price and broad and regular promotion

campaign
Good caring customer services

Have the largest mobile users

Convenient and guarantees

Social activites: free mobile phone for new

graduating students

8. competition

9. price and demand

10. II. General pricing
approaches
Cost-based pricing

Value-based pricing
Competition-based pricing

11. Cost-based pricing
Cost-plus pricing: adding a standard markup to the cost

of the product.
unit cost=variable cost+ fixed cost/unit sales.
Markup price=unit cost/(1-desired return on sales)
Breakeven pricing: at the price it can break even

Breakeven volume=fixed cost/(price- variable cost)

13. Value-based pricing
Based on buyers’ perceptions of value

14. Cost-based vs value-based
Cost-based pricing

product cost price value customers
Value-based pricing

customers value price cost product

15. Competition-based pricing
Going-rate pricing

following competitors' prices
 Sealed-bid pricing
how the firm thinks competitors will price

17. New product pricing strategies
Market skimming pricing

Market penetration pricing


18. Market skimming vs market
penetration strategies
Market skimming Market penetration
-Setting a very high price -Setting a low price
-Conditions: -Conditions:
+ high quality and image +market is highly price
sensitive
+cost for small volume is
not so high +production and
distribution costs fall when
+ position of competitor
sales volume increase
+position of competitor

19. Product-mix pricing strategies
Product line pricing

Optional-product pricing

Captive-product pricing

By-product pricing

Product-bundle pricing


23. Price- Adjustment
Strategies
Discount and
allowance
pricing
Segmented International
pricing pricing
+
Strategies
Psychological Geographical
pricing pricing
Value
Promotional
pricing
pricing

24. Discount and Allowance pricing
Reducing prices to reward
customer responses
reducing prices to buyers who
Cash Discount pay their bills promptly
reducing prices to buyers who buy
large volumes
Quantity Discount
reducing prices to trade channel
members who perform certain
Functional Discount functions
reducing prices to buyers who buy
merchandise or services out of
Seasonal Discount season
promotional money for an
agreement to feature products in
Allowance some ways

26. Customer- segment pricing
Different customers pay different prices
for the same product or service
Product-form pricing
Different versions of the product are priced
Segmented differently
Pricing Location pricing
Different locations are priced differently
even though the cost is the same
Time pricing
Prices vary by the season, the month,
the day, and even the hour

28. Psychological Pricing
A pricing approach that considers the psychological
of prices and not simply the economics.
The price is used to say something about the product
+ Price-quality relationship
+ Reference prices: Prices that buyers carry in their minds
and refer to when looking at a given product

29. Promotional Pricing
Temporarily pricing products below the list price
and sometimes even below cost,
to increase short-run sales
+ Loss leaders
+ Special-event pricing
+ Cash rebates
+ Low-interest financing, longer warranties, free maintenance

32. Value Pricing
Finding the delicate balance between
the price and quality
that gives consumers the value they seek
+“Value” is not the same as “cheap”
+ Value pricing requires price cutting coupled with finding
ways to maintain or even improve quality while still
making a profit

33. Geographical
pricing
+ FOB-origin pricing
+ Uniform-delivered pricing
+ Zone pricing
+ Basing-point pricing
+ Freight-absorption pricing

34. International Pricing
Prices charged in a specific country depend
on many factors
+ Economic conditions
+ Competitive situation
+ Laws / regulations
+ Distribution system
+ Consumer perceptions
+ Cost considerations

35. Competitor
Initiating
Reactions
Price Cuts
To Price
Changes
Price
Changes
Buyer
Initiating
Reactions
Price
to Price
Increases
Changes

37. Initiating price increases
Circumstances:
2.
Cost inflation

Over demand

2. Bad effects: resented by customers, dealers, sales
force
If succeed: great profit
Ways
7.
Invisible

Push up openly


39. Increases
 Lower sales
 Product hot->buy soon
 Unusually good value
 Company is greedy

40. Example of legal &illegal price
promotional pricing

41. No
Has Competitor Cut Hold Current Price;
Price? Continue to Monitor
Competitor’s Price.
No
Will Lower Price
Negatively Affect Our
Market Share & Profits? Reduce Price
Raise Perceived
No
Quality
Can/ Should Effective
Improve Quality
Action be Taken?
& Increase Price
Yes
Launch Low-Price
“Fighting Brand”

42. Responding to price changes
Q of price changes
 Why change?
 What happen to company MS & profit if not respond?
Analysis
 Own product’s stage in life cycle, importance in
product’s mix, intentions & resources of company,
possible customers reactions