Principles of marketing: Lecture 45

MGT301
Principles of Marketing
Lecture­45


Summary
of  
Lecture­44


Review­1


Today’s Topics

Review­2


Individual Product Decisions


Product Attributes
Branding
Labeling

Packaging
Product Support Services


New Product Development 
Marketing

Strategy
Concept
Development
and Testing

Idea
Screening
Idea
Generation

Business
Analysis
Product
Development

Test
Marketing

Commercializat
ion


Product Life­Cycle 
(PLC)
Sales and
Profits ($)
Sales

Profits

Time
Product
Introduction
Development
Stage

Growth

Maturity

Decline

Sales and Profits Over
the Product’s Life
From
Inception to Demise



Price
– The amount of money charged for a product or 
service, or the sum of the values that consumers 
exchange for the benefits of having or using the 
product or service.


Factors Affecting Price Decisions           


Internal

Internal Factors
Factors

Positioning
Objectives

Pricing
Pricing
Decisions
Decisions

External
External Factors
Factors

Target
Market


Costs
Total
TotalCosts
Costs
Sum
Sumof
ofthe
theFixed
Fixedand
andVariable
VariableCosts

Costsfor
foraaGiven
Given
Level
Levelof
ofProduction
Production
Variable
VariableCosts
Costs

Fixed
FixedCosts
Costs
(Overhead)
(Overhead)
Costs
Coststhat
thatdon’t
don’t
vary
varywith
withsales
salesor
or
production
levels.
production levels.
Executive
ExecutiveSalaries

Salaries
Rent
Rent

Costs
Coststhat
thatdo
dovary
vary
directly
directlywith
withthe
the
level
levelof
ofproduction.
production.
Raw
Rawmaterials
materials


Fixed Costs

Variable Costs

Rent

Raw materials

Depreciation

Component parts

Manager’s salaries

Hourly wages

Property taxes

Packaging & freight

Insurance

Sales commissions


Setting Pricing Policy


General Pricing Approaches


Cost­based Pricing



Value­based Pricing



Competition­based Pricing


Break­even…for
Determining Target Return Price 
and 
Break­even Volume


1000

Total cost

Rupees (in thousands)

1200
1200

Total revenue
Target profit

800

Break-even point

600
400

Fixed cost

200
0

10

20

30

40

50

Sales volume in units (thousands)


New Product Pricing Strategies
•

Market Skimming

•

Market Penetration

 

 

Price ­ Quality Strategies


Price
Higher

Quality

Higher

Lower

Lower

Premium
Strategy

Good-Value
Good-Value
Strategy
Strategy

Overcharging
Overcharging
Strategy
Strategy

Economy
Economy

Strategy
Strategy


Price­Adjustment Strategies 


Discount and Allowance Pricing



Segmented Pricing



Psychological Pricing



Promotional Pricing



Geographical Pricing



International Pricing

Price Changes


Responding to price changes


Has
HasCompetitor
CompetitorCut
Cut
Price?
Price?

Will
WillLower
Lower Price
Price
Negatively
Negatively Affect
Affect Our
Our
Market
MarketShare
Share&&Profits?
Profits?

Can/
Can/Should
ShouldEffective
Effective

Action
Actionbe
beTaken?
Taken?

No

Hold
HoldCurrent
Current Price;
Price;
Continue
Continueto
toMonitor
Monitor
Competitor’s
Competitor’sPrice.
Price.

No
Reduce
Reduce Price
Price

No
Yes

Raise
RaisePerceived
Perceived

Quality
Quality
Improve
ImproveQuality
Quality
&& Increase
IncreasePrice
Price
Launch
Launch Low-Price
Low-Price
“Fighting
“FightingBrand”
Brand”