MARKETING LESSON 7

• General Pricing Approaches


  • Cost-based Pricing
  • Competitive Pricing
  • Value-added Pricing
• Cost-based Pricing

  Pricing approach based on the cost of producing, distributing, and promoting the product
• Cost-based Pricing Formula

  Unit Cost Pricing = Variable Cost + Fixed Cost/Unit Sales
• Competition-based Pricing


  Pricing approach that benchmarks competitors' prices
• Value-based Pricing


  Setting a price on the perceived value of the product
• Value-based Pricing Examples


  • Rolex and Louis Vuitton based on exclusivity and status
  • Tesla based on premium products with advance technology and environment benefits
• Market skimming


  Setting the high price, then gradually reducing the price
• Market penetration


  Setting the price lower than planned, then increasing it eventually
• Psychological Pricing


  • Odd-number pricing - Prices that end in non-rounded odd numbers
  • Free pricing - Selling two complementary products; bundle
• Discriminatory Pricing


  • Customer-segment pricing
  • Product-form pricing
  • Image pricing
  • Location pricing
  • Time Pricing
• Customer-segment pricing


  Customer group are charged different prices for the same product
• Product-form pricing


  It is quite a common practice where a Company adds a new feature and increases the price more than the cost difference incurred in adding a new feature
• Image Pricing


  Upscale products practically demand higher prices
• Location Pricing


  A form of discrimination based on the physical location of the buyers
• Time Pricing


  Pricing strategy linking prices to a particular time
• Product Mix Pricing

  • Product line pricing
  • Optional feature pricing
  • Captive product pricing
  • By-product pricing
  • Product bundle pricing
• Product line pricing


  Reflects the benefits of the parts by range
• Product line pricing example

  • Basic Wash - P80
  • Wash and wax - P100
• Optional Feature Pricing

  Optional "extras" increase the overall price of the product or service
• Optional Feature Pricing example

  • Guaranteed seats
• Captive Product Pricing


  Where products have complements, companies will charge a premium price since the consumer has no choice
• Captive Product Pricing example

  • Low price printer but expensive ink refills
• By-product Pricing


  By product is something which is produced as a result of producing something else (the main product), usually disposed off and have little value
• Product Bundle Pricing


  Sellers combine several products in the same package, also serves to move old stocks
• Place/Distribution


  - The third P of the marketing mix,

  - Also known as distribution channels

  - It seeks to answer question of how best to move products from the producer to consumers
• Distributors


  Appointed to perform the distribution function from manufacturers in making their products available, may sell to wholesalers or retailers or may even go directly to consumers
• Types of Distributorships


  • Online sellers
  • Wholesalers
  • Company sales force
  • Value-added resellers (VARs)
  • Professional sales agencies
  • Specialty dealers
• Online sellers


  Companies exist to serve as Internet-based distribution points for a number of manufacturers and dealers, especially as online buying is steadily growing in the local market
• Wholesalers


  these Buy products in bulk, typically taking ownership and transferring the risks involved with ownership into their hands
• Value-added resellers (VARs)


  Firms that put together products from different suppliers to come up with systems or solutions to appeal to markets with specific needs
• Professional sales agencies


  Take on the selling products in exchange for commission schemes
• Specialty dealers


  Distributors that specialize in either a particular product categories or in the specialized needs of very distinct target markets
• Distribution System


  • Exclusive Distribution
  • Intensive Distribution
  • Selective Distribution
• Exclusive Distribution


  Giving exclusivity to appointed distributors
• Intensive Distribution


  The supplier will distribute its products to as many different points of distribution as possible
• Selective Distribution


  A mix of exclusive and intensive distribution
• Retailing


  An activity involving the sales of products or services directly to final consumers
• Types of Retailers


  • Specialty stores
  • Department stores
  • Supermarkets
  • Convenience stores
  • Discount stores
  • Superstores
  • Showrooms
• Specialty stores


  Stores have very narrow width in terms of product mix but each of the product lines that they offer have extensive length and depth
• Department stores


  Typically large because they offer a broad width of product categories, such as shoes, clothes, fashion, accessories, home furnishings, snacks, etc.