Professional Documents
Culture Documents
Reference Prices
Price-quality inferences
Price endings
Price cues
Price Cues
Determine demand
Estimate costs
• Survival
• Maximum current
profit
• Maximum market
share
• Maximum market
skimming
• Product-quality
leadership
Step 2: Determining Demand
Price Sensitivity
Estimating
Demand Curves
Price Elasticity
of Demand
Inelastic
and Elastic Demand
Factors Leading to Less Price
Sensitivity
• The product is more distinctive
• Buyers are less aware of substitutes
• Buyers cannot easily compare the quality of substitutes
• The expenditure is a smaller part of buyer’s total income
• The expenditure is small compared to the total cost of
the end product
• Part of the cost is paid by another party
• The product is used with previously purchased assets
• The product is assumed to have high quality and
prestige
• Buyers cannot store the product
Step 3: Estimating Costs
Types of Costs
Accumulated
Production
Target Costing
Tata motors developed ‘Nano’its
small car with a target price
Step 5: Selecting a Pricing Method
• Markup pricing
• Target-return pricing
• Perceived-value
pricing
• Value pricing
• Going-rate pricing
• Auction-type pricing
Auction-Type Pricing
English auctions
Dutch auctions
Sealed-bid auctions
Step 6: Selecting the Final Price
Geographical Pricing
Discounts/Allowances
Promotional Pricing
Differentiated Pricing
Price-Adaptation Strategies
Discounts/ Allowances
• Cash discount
• Quantity discount
• Functional discount
• Seasonal discount
• Allowance
Promotional Pricing Tactics
• Loss-leader pricing
• Special-event pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties and service
contracts
• Psychological
discounting
Differentiated Pricing
• Customer-segment
pricing
• Product-form pricing
• Image pricing
• Channel pricing
• Location pricing
• Time pricing
Pricing for rural markets
• A large proportion have a low and seasonal income
• Several approaches adopted by retailers and
companies to address this
• Rural retailers often extend credit
• Retailers also “break the bulk” and sell in loose form,
in small quantities
• Companies use a similar strategy by introducing
“low-unit packing” or LUP
• Companies also develop low-priced products with a
target price for rural markets
• Companies might offer refill packs or recyclable and
reusable packs
MARKETING MANAGEMENT
• Gather information
• Develop and disseminate persuasive
communications
• Reach agreements on price and terms
• Acquire funds to finance inventories
• Assume risks
• Provide for storage
• Provide for buyers’ payment of their bills
• Oversee actual transfer of ownership
Marketing Channel Flows
Consumer Marketing Channels
Industrial Marketing Channels
Designing a
Marketing Channel System
Lot size
Waiting/delivery time
Spatial convenience
Product variety
Service backup
Identifying Channel Alternatives
Types of
intermediaries
Number of
intermediaries
Terms and
responsibilities
Number of Intermediaries
Exclusive
Selective
Intensive
Terms and Responsibilities
of Channel Members
• Price policy
• Condition of sale
• Distributors’ territorial rights
• Mutual services and responsibilities
The Value-Adds vs. Costs of Different
Channels
Channel-Management Decisions
• Coercive
• Reward
• Legitimate
• Expert
• Referent
Channel Integration and Systems
Vertical marketing
systems
• Corporate VMS
• Administered VMS
• Contractual VMS
Horizontal
marketing systems
Multichannel
systems
What is Channel Conflict?
Goal incompatibility
Differences in perception
Intermediaries’ dependence
on the manufacturer
e-Commerce Marketing Practices
• Pure-click
• Brick-and-click