MARKETINGMANAGEMENT12thedition14DevelopingPricingStrategiesandProgramsKotlerKeller14-2ChapterQuestionsHowdoconsumersprocessandevaluateprices?Howshouldacompanysetpricesinitiallyforproductsorservices?Howshouldacompanyadaptpricestomeetvaryingcircumstancesandopportunities?Whenshouldacompanyinitiateapricechange?Howshouldacompanyrespondtoacompetitor’spricechallenge?14-3SynonymsforPriceRentTuitionFeeFareRateTollPremiumHonorariumSpecialassessmentBribeDuesSalaryCommissionWageTax14-4CommonPricingMistakesDeterminecostsandtaketraditionalindustrymarginsFailuretorevisepricetocapitalizeonmarketchangesSettingpriceindependentlyoftherestofthemarketingmixFailuretovarypricebyproductitem,marketsegment,distributionchannels,andpurchaseoccasion14-5ConsumerPsychologyandPricingReferencepricesPrice-qualityinferencesPriceendingsPricecues14-6Table14.1PossibleConsumerReferencePrices“Fairprice”TypicalpriceLastpricepaidUpper-boundpriceLower-boundpriceCompetitorpricesExpectedfuturepriceUsualdiscountedprice14-7Table14.2ConsumerPerceptionsvs.RealityforCarsOvervaluedBrandsLandRoverKiaVolkswagenVolvoMercedesUndervaluedBrandsMercuryInfinitiBuickLincolnChrysler14-8PriceCues“Lefttoright”pricing($299versus$300)OddnumberdiscountperceptionsEvennumbervalueperceptionsEndingpriceswith0or5“Sale”writtennexttoprice14-9WhentoUsePriceCuesCustomerspurchaseiteminfrequentlyCustomersarenewProductdesignsvaryovertimePricesvaryseasonallyQualityorsizesvaryacrossstores14-10StepsinSettingPriceSelectthepriceobjectiveDeterminedemandEstimatecostsAnalyzecompetitorpricemixSelectpricingmethodSelectfinalprice14-11Step1:SelectingthePricingObjectiveSurvivalMaximumcurrentprofitMaximummarketshareMaximummarketskimmingProduct-qualityleadership14-12Step2:DeterminingDemandPricesensitivityEstimatingdemandcurvesPriceelasticityofdemand14-13Step3:EstimatingCostsTypesofCostsAccumulatedProductionActivity-BasedCostAccountingTargetCosting14-14CostTermsandProductionFixedcostsVariablecostsTotalcostsAveragecostCostatdifferentlevelsofproduction14-15Step5:SelectingaPricingMethodMarkuppricingTarget-returnpricingPerceived-valuepricingValuepricingGoing-ratepricingAuction-typepricing14-16Auction-TypePricingEnglishauctionsDutchauctionsSealed-bidauctions14-17Step6:SelectingtheFinalPriceImpactofothermarketingactivitiesCompanypricingpoliciesGain-and-risksharingpricingImpactofpriceonotherparties14-18Price-AdaptationStrategiesGeographicalpricingDiscounts/allowancesPromotionalpricingDifferentiatedpricing14-19Price-AdaptationStrategiesCountertradeBarterCompensationdealBuybackarrangementOffsetDiscounts/AllowancesCashdiscountQuantitydiscountFunctionaldiscountSeasonaldiscountAllowance14-20PromotionalPricingTacticsLoss-leaderpricingSpecial-eventpricingCashrebatesLow-interestfinancingLongerpaymenttermsWarrantiesandservicecontractsPsychologicaldiscounting14-21DifferentiatedPricingandPriceDiscriminationCustomer-segmentpricingProduct-formpricingImagepricingChannelpricingLocationpricingTimepricingYieldpricing14-22IncreasingPricesDelayedquotationpricingEscalatorclausesUnbundlingReductionofdiscounts14-23BrandLeaderResponsestoCompetitivePriceCutsMaintainpriceMaintainpriceandaddvalueReducepriceIncreasepriceandimprovequalityLaunchalow-pricefighterline