Lecture Marketing (12/e): Chapter 14 – Kerin, Hartley, Rudelius

Chapter 14 - Arriving at the final price. After reading chapter 14, you should be able to: Describe how to establish the “approximate price level” using demand-oriented, cost-oriented, profit-oriented, and competition-oriented approaches; recognize the major factors considered in deriving a final list or quoted price from the approximate price level; identify the adjustments made to the approximate price level on the basis of discounts, allowances, and geography.

LO 14-2

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 14, YOU SHOULD BE ABLE TO:

LO 14-1 Describe how to establish the

“approximate price level” using demand-oriented, cost-oriented, profit-oriented, and competition- oriented approaches.

Recognize the major factors considered in deriving a final list or quoted price from the approximate price level.

LO 14-4

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 14, YOU SHOULD BE ABLE TO:

Identify the adjustments made to the approximate price level on the basis of discounts, allowances, and geography.

Name the principal laws and regulations affecting specific pricing practices.

LO 14-3

VIZIO, INC.—WHERE VISION MEETS

FIGURE 14-1 The six steps in setting price

The first three steps were covered in Chapter

13 and the last three steps in Chapter 14.

FIGURE 14-2 Four approaches for selecting an approximate price level

STEP 4: SELECT AN APPROPRIATE

MARKETING MATTERS

Energizer’s Lesson in Price Perception—Value

LO 14-1

FIGURE 14-3 For prestige pricing, the demand

curve for high-quality products is backwards

sloping

FIGURE 14-4 For price lining, the demand

curve is elastic at each price point but inelastic between price points

STEP 4: SELECT AN APPROPRIATE

STEP 4: SELECT AN APPROPRIATE

Pricing

• Cost-Plus Fixed-Fee Pricing

• Cost • Selling Price

FIGURE 14-A Markups for a manufacturer,

wholesaler, and retailer on a home appliance

sold to consumers for $100

STEP 4: SELECT AN APPROPRIATE

FIGURE 14-5 Results of a spreadsheet

simulation to select a price that will achieve a

target return on investment

STEP 4: SELECT AN APPROPRIATE

USING MARKETING DASHBOARDS

Are Red Bull Prices Above, At, or Below the Market?

LO 14-1

Price Premium (%)

Price Premium (%) = Dollar Sales ($) Market Share for a Brand

Unit Volume (#) Market Share for a Brand – 1

STEP 5: SET THE LIST OR QUOTED PRICE

CHOOSE A PRICE POLICY

LO 14-2

• Clickstream

MAKING RESPONSIBLE DECISIONS

Dynamic Pricing—Is There Discrimination

in Bargaining for a New Car?

LO 14-2

STEP 5: SET THE LIST OR QUOTED PRICE

CONSIDER THESE EFFECTS ON PRICING

STEP 5: SET THE LIST OR QUOTED PRICE

BALANCE INCREMENTAL COSTS AND REVENUES

FIGURE 14-6 Expected incremental revenue

from pricing and other marketing actions must

more than offset incremental costs to achieve

incremental profit

FIGURE 14-7 Three special adjustments to list

or quoted price include discounts, allowances, and geographical adjustments

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

• Noncumulative Quantity Discounts

• Cumulative Quantity Discounts

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

DISCOUNTS

LO 14-3

FIGURE 14-8 The structure of trade discounts

affects the manufacturer’s selling price and the margins made by resellers in the marketing

channel

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

ALLOWANCES

LO 14-3

MARKETING MATTERS

Everyday Low Prices at the Supermarket = Everyday Low Profits—Creating Customer Value at a Cost

LO 14-3

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

GEOGRAPHICAL ADJUSTMENTS

LO 14-3

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

GEOGRAPHICAL ADJUSTMENTS

LO 14-3

• Multiple-Zone Pricing

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

GEOGRAPHICAL ADJUSTMENTS

LO 14-3

• Freight Absorption Pricing

• FOB with Freight-Allowed Pricing

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

GEOGRAPHICAL ADJUSTMENTS

LO 14-3

• Basing-Point Pricing

FIGURE 14-9 Several pricing practices are

affected by legal and regulatory restrictions,

which benefit both consumers and firms

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

LEGAL & REGULATORY ASPECTS OF PRICING

LO 14-4

• Horizontal Price Fixing

• Vertical Price Fixing

 Resale Price Maintenance

STEP 6: MAKE SPECIAL ADJUSTMENTS

TO THE LIST OR QUOTED PRICE

LEGAL & REGULATORY ASPECTS OF PRICING

FIGURE 14-10 Five most common deceptive

pricing practices

MARKETING INSITE

So You Think You Know What “Free” Means?

Think Again

LO 14-4

CARMEX [B]: SETTING THE PRICE OF

THE NUMBER ONE LIP BALM

VIDEO CASE 14