978-0077729028 Chapter 15 Slides

Type

Quiz

Book Title

Marketing 5th Edition

ISBN 13

978-0077729028

April 8, 2019

Powerpoint Slides With Teaching Notes

Power Point Slide Teaching Notes

15-1: Strategic Pricing Methods

15-2: Learning Objectives These are the learning objectives for this

chapter.

15-3: Groupon.com McDonald’s announced plans to introduce

chicken wings for a limited time.

It also released projections that it would sell

approximately 250 million orders.

Ask students Should McDonald’s sell chicken

wings? If so, then how much would you pay?

15-4: Pricing Strategies Note the many factors that go into formulating

a pricing strategy and discuss why some

strategies choose not to take into consideration

the value that consumers place on an offering.

15-5: Cost-Based Methods These simple methods add a percentage

amount to the unit cost to derive the price of

the good.

Ask students: Simplicity is the major benefit

of this method; what are some of the potential

problems associated with it?

Answer: It does not consider what the value

the customer places on the product or service.

15-6: Competitor-Based Methods Ask students: Why would someone pay far

more for the same item in different stores? For

example – the same diamond at Costco and

Tiffany’s.

Real estate prices are based heavily on the

prices of other homes in the area. There are

many websites like zillow.com to help gather

information when pricing your home.

This web link takes you to the Zillow

homepage.

15-7: Value-Based Methods Sellers need to determine consumer value

perceptions.

The print ad for Omega points to a watch with

higher quality.

This YouTube ad (always check link before

class) depicts the value the Mercedes-Benz

brand offers in both the beauty and brains

categories.

15-8: Improvement Value Method Using the improvement value method for a

laptop you can calculate the price that could be

charged for a new laptop.

Suppose the key features were – weight of the

laptop, processing speed, and hard drive

capacity and battery life.

The improvement value of the new laptop on

these four features is provided in column two.

The benefit weights are provided in column

three and the weighted factor – multiplication

of improvement value and benefit weight is

provided in column four.

The overall analysis suggests a 21%

improvement value of the new laptop relative

to the comparison laptop.

Thus, we could charge somewhere up to 21%

more using this method.

15-9: Costs of Ownership Method Installing solar panels on a home is costly, but

the savings over the life of the panels make the

cost much lower than traditional electric

power.

Governments offer incentives that lower the

initial investment, in hopes that more

homeowners will switch to using solar power.

The ad shows a watch that might be expensive

but, because it is “unstoppable” it will last a

long time and is therefore a good purchase.

Ask students: What incentive would you need

to do so? What method could you use to

determine it?

15-10: Check Yourself 1. Cost based, competitor based, value

based

2. Value based include approaches to

setting prices that focus on the overall value

of the product offering as perceived by the

consumer. Two key approaches include

Improvement Value Method and Cost of

Ownership Method.

15-11: Pricing Strategies This slide introduces the subsequent series of

slides or can be used as a basis for a shortened

lecture.

15-12: How to Pick the Right Diamond After viewing the video as students why this

purchase is so important?

They will realize it is because it is expensive,

but also a rare and emotional connected

purchase.

Note: Please make sure that the video file is

located in the same folder as the PowerPoint

slides.

15-13: Everyday Low Pricing vs.

High/Low Pricing

Group activity: Imagine you need an outfit for

an upcoming party.

You can visit TJMaxx, where you know you

will find an EDLP pricing strategy.

However, Nordstrom is having its semi-annual

sale, during which it drastically marks down its

usually high prices.

Where do you think you will find a better

price? Which offers better value? Why?

15-14: Consumers’ Use of Reference Prices Group activity: In groups, list the average

prices of the following items: rent on a

one-bedroom apartment, a backpack, a

washing machine, a mid-size car, a house, a

bicycle, and a soda. Compare the price points

among groups.

Usually, students provide relatively accurate

price points for products they use frequently,

but their estimates likely vary significantly for

the other items.

Discuss how they determined these prices

15-15: Reference Pricing This is an interesting ad – it does not give the

original price of the products, but gives proof

that the products are discounted from the

regular price..

This positions the clothing as higher value so

that when the consumer shops for clothing and

compares prices, they know they are receiving

more value for their money.

15-16: New Product Pricing Group activity: Develop a list of products that

might use price skimming versus penetration

pricing.

What qualities should a product possess to use

a price skimming strategy?

For example, Godiva introduced its hot

chocolate mix at a price point that was double

that of other hot cocoa mixes.

How was it able to achieve success with this

product?

Penetration pricing helps firms build market

share for their new products quickly, but

consumers must be price elastic for this

strategy to work.

15-17: Check Yourself 1. EDLP saves search costs of finding

lowest overall prices, and High/low

provides the thrill of the chase for the

lowest price.

2. Price skimming and penetration

pricing.

15-18: Pricing Tactics Strategies must balance all 5Cs; tactics tend to

focus on select components

15-19: Pricing Tactics Aimed at Consumers This slide can be used as the basis for a

shortened lecture or to introduce the

subsequent slides

15-20: Markdowns Ask students: are markdowns used only to

take care of buying mistakes?

Answer: no, sometimes retailers use

markdowns to generate traffic into the store.

15-21: Quantity Discounts for Consumers Consumers often enjoy quantity discounts, but

remind students that bigger packages do not

always mean lower unit prices.

15-22: Seasonal Discounts B2B consumers are encouraged to buy early,

but for consumers, seasonal discounts also

encourage them to buy after the season so

sellers can get rid of leftover merchandise.

Ask students: Have you ever bought wrapping

paper right after Christmas?

How much did you save?

15-23: Coupons and Rebates Ask students: When did you last use a coupon

or a rebate? For what type of product? How

much did you save with the rebate/coupon?

For what kind of products would you expect to

find a coupon or rebate? How do coupons or

rebates influence your purchases?

This YouTube video (always check link before

class) is a very typical local car sales ad?

Ask students why these are effective?

They give discounts, trade ins, and always

have a deadline which promotes urgency in the

consumer.

15-24: Leasing Leasing is good because they can lease a better

car then they might be able to afford. In

addition, consumers often get tired of their cars

and want to try something new.

15-25: Price Bundling Price bundling can be used to achieve a variety

of objectives.

Ask students: what are some examples of

commonly price bundled items?

Answer: meals at fast-food restaurants, cruise

vacations, grocery store items.

15-26: Leader Pricing Ask students: what are some examples of

leader priced items?

Answer: milk, eggs, coffee, white bread.

15-27: Price Lining Ask students to think about a product that

offers different levels of quality (e.g., cars,

hotels, and clothing).

How do firms use price lining to establish

differences between the products? Give

specific examples.

Answer: Mercedes Benz offers the C class for

the lower, an E class for the medium, and the S

class for the highest price lines.

Ralph Lauren offers different lines at different

price points as well: Chaps, Polo/Ralph

Lauren, Ralph Lauren Black Label, and Purple

Label.

15-28: Business to Business Pricing Tactics

and Discounts

This slides provide the basis for a shortened

lecture or introduces the more detailed

discussion that follows.

15-29: Seasonal Discounts Just as consumers do, businesses benefit from

seasonal pricing, though with different timing.

Most retailers place their Christmas orders in

the summer or early fall.

Some vendors give them an extra discount to

place orders well in advance of the selling

season.

Ask students: why would a vendor offer a

seasonal discount to retailers? Answer:

Because they can plan their production and get

the inventory out of their warehouses and into

the hands of the retailers.

15-30: Cash Discounts Sellers want outstanding invoices paid as soon

as possible and therefore offer discounts to

encourage it.

Ask students: Would you pay your rent bill

early if you received a monetary incentive to

do so?

15-31: Allowances As the questions at the end of several chapters

show, slotting allowances have become quite

controversial, even prompting Congressional

hearings.

Group activity: Split the class in half. One

half represents smaller producers who believe

they are being shut out of grocery markets by

slotting fees, which can reach $10,000 per

store or more.

The other half represents grocers, who consider

slotting fees necessary for their survival in the

competitive marketplace.

Conduct a debate that presents both sides of

this issue.

15-32: Quantity Discounts Ask students: Why would a vendor offer a

quantity discount to a retailer?

Answer: It helps them plan their production

schedule. If may stimulate the retailer to buy

more merchandise.

It actually costs less on a per unit basis to sell

more in one order than less, e.g., transportation

expense.

15-33: Uniform Delivered vs. Zone Pricing Online shoppers know that delivery can add a

significant amount onto cost; the same is true

for B2B transactions, in which sellers often

vary their delivery charge calculations based

on where the customer lives.

15-34: Check Yourself 1. Price lining. price bundling. leader

pricing

2. Seasonal discounts, cash discounts,

allowances, quantity discounts, uniform

delivered versus zone pricing

15-35: Legal Aspects and Ethics of Pricing A host of laws and regulations at both the

federal and state levels attempt to prevent

unfair pricing practices, but some are poorly

enforced, and others are difficult to prove.

15-36: Deceptive or Illegal Price

Advertising

Ask students: When is a sale not really a sale?

Answer:

If the merchandise is placed on the retail floor

and almost immediately put on sale, then it is

considered to be deceptive because the

merchandise was never really sold at the higher

price, but consumers are expected to believe

that they are receiving a significant discount.

Ask students: Have you ever been involved

in a bait and switch?

15-37: Predatory Pricing Ask students: How would a company prove

predatory pricing?

They would need records which show intent or

have interviews of those who can verify the

intent to drive competition out of business.

In addition, they must show that the company

charged prices lower than its average costs.

To date, no one has been able to prove that

Wal-Mart engages in predatory pricing.

15-38: Price Discrimination Price discrimination in a B2B setting isn’t

always illegal.

It is legal to give quantity discounts, to meet

competition, and in barter situations.

Ask Students: Why are quantity discounts

legal? Because it costs less on a per unit basis

to sell to customers that buy larger quantities

15-39: Price Fixing Ask students: How many products list a

manufacturer’s suggested retail price? How

many indicate a retail price instead?

Note that MSRPs are a form of vertical price

fixing; the manufacturer sets the price, and

wherever the consumer shops, the price will be

the same.

However, some retailers argue that this form of

price fixing prevents them from passing lower

costs on to consumers.

Ask students: What do you think?

15-40: Fraud on eBay EBay offers great prices but there is some risk

to consumers. What was the fraud here?

Note: Please make sure that the video file is

located in the same folder as the PowerPoint

slides.

15-41: Check Yourself Deceptive reference prices, loss leader pricing,

bait and switch