Bài giảng Business Marketing - Chapter 14: Pricing and Negotiating for Value

McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.Chapter 14Pricing andNegotiating for ValueAssignmentYou are setting up a new coffee shop:Your target customers are students, young adults such as 9X, 8X.Your rent: 2,000 USD/ monthInitial investment (construction, interior design, furniture): 100.000 USDWork in Group:Design your products/ services and pricing plan for your products and servicesDiscuss all the factors that you consider when designing your product and pricing plan.How many pricing options do your group have?How pricing plan is linked with your overall marketing strategy and plan? PRICING ISSUES: WHY PRICING IS DIFFICULTObjective & ExplicitSTRATEGY ISSUES (Pricing objectives)COMPETITIVE FACTORS (Rivals’ prices)TRADE FACTORS (Channel power)LEGAL FACTORS (Restrictions and discrimination)DEMAND FACTORS (How much do customers want)COST FACTORS (Actual outlays)Subjective andInterpretive14-*A MODEL FOR MANAGING PRICEEvaluation and Formation ofPrices & policy Demand Factors Elasticity of demand Cross elasticities Customer value perceptions1 Cost Factors Costs now Anticipated costs Economic objectives2 Cost Factors Structure of competition Barriers to entry Intent of rivals3 Strategy Issues Target market selection Product positioning Price objectives Marketing program4 Trade Factors Power in the channel Traditions and roles Margins5 Legal Factors Vertical restrictions Price discrimination6Exhibit 14-214-*SUPPLY AND DEMANDQuantityDemandSupplyPriceExhibit 14-314-*Exhibit 14-5Types ofsituationsImportantdimensionsPure CompetitionOligopolyMonopolisticCompetitionMonopolyUniqueness of each firm’s productNoneNoneSomeUniqueNumber of competitorsManyFewFew to manyNoneSize of competitors (compared to size of marketSmallLargeLarge to smallNoneElasticity of demand facing firmCompletely ElasticKinked demand curve (elastic and inelasticEitherEitherElasticity of industry demandEitherInelasticEitherEitherControl of price by firmNoneSome (with care)SomeCompleteANALYZING MARKET STRUCTURES14-*Exhibit 14-9BREAK-EVEN ANALYSISBREAK-EVEN IS DONE TO FIND THE LEVEL OF SALES TO COVER ALL FIXED AND VARIABLE COSTSQ is quantity; FC, fixed costs; VC, variable costs;UVC, unit variable costs; Price, average revenueBREAK-EVEN OCCURS WHEN: TOTAL REVENUE=TOTAL COSTGiven: Price x Q = FC + VC = FC x (UVC x Q)Solve for Q (quantity) (Price × Q) – (UVC × Q) = FC Q(Price – UVC) = FC Q = FC/(Price-UVC) = FC / unit marginSolve for Q (quantity) (Price × Q) – (UVC × Q) = FC Q(Price – UVC) = FC Q = FC/(Price-UVC) = FC / unit margin14-*KEY DECISIONS IN MANAGING PRICEDETERMINE PRICING STRATEGY– Develop specific approach to achieve price objectivesDETERMINE CHANNEL INTERMEDIARY PRICES, COSTS AND MARGINSDETERMINE SINGLE PRODUCT AND PRODUCT LINE PRICINGDevelop pricing structures for substitute and complementary productsDETERMINE WHETHER TO PARTICIPATE IN BIDDING AND NEGOTIATION FOR SALESESTABLISH A PRICING SYSTEMBased on the 4 C’s : Costs, Customers, Competitors, and Channels14-*SCENARIO: What sales increase is needed to cover a $1.2 million increase in expenditures?MARGINAL ANALYSISNR = $1.2 million + COGSNR = $1.2 million + .75 NR.25 NR = $1.2 millionNR = $1.2 million / .25NR = $4.8 millionWHERE: COGS = 75% of Net Sales NR = New Revenue14-*Exhibit 14-11A PRICE INCREASE/DECREASE BY ONE CHANNEL MEMBER WILLIMPACT THE PRICE CHARGED BY SUBSEQUENT CHANNEL MEMBERSCALCULATING MARGIN CHAINSASSUME: Given a new product selling for $10,what is the maximum factory price allowable?WHOLESALERDEALERNet Sales100%Net Sales100%COGS85%COGS70%Gross Profit15%Gross Profit30% Apply $10 dealer priceNet Sales$7.00Net Sales$10.00COGS5.95COGS7.00Gross Profit$1.05Gross Profit$ 3.0014-*TYPES OF PRICINGADMINISTERED PRICES - Prices established by seller as impersonal and take-it-or-leave it offersCOMPETITIVE BIDDING – OPEN BIDDING – Any organization can compete for business CLOSED BIDDING - Solicits bids from exclusive list of potential suppliersNEGOTIATED PRICES Seeks prices based on mutually agreeable terms14-*ROBINSON-PATMAN ACTVIOLATIONS OCCUR:When different prices are charged to competitors;The differences are not attributable to cost differences;The product is essentially the same for each competitor;The effects are damaging to competition14-*NEGOTIATION PRIMER ● AVOIDANCE: When a company doesn’t need to deal with the partner or to make a deal*● ACCOMMODATION: Sacrifice necessary to hold or sustain a relationship ● COMPROMISE: Hybrid of competition and accommodation*● COMPETITIVE NEGOTIATION: There is a winner and a loser *● COLLABORATION: Joint problem solving for a creative win-win solution *NEGOTIATION STRATEGY OPTIONS14-*LEVERAGE FOR A GLOBAL PRICING CONTRACTThese products or services are a significant portion of customer’s purchases.Local markets are reasonably homogeneous.Customer’s top management is omitted.Customer seeks value enhancement more than cost cutting.Supplier has good working relationships not just at HQ, but with the company’s country managers.Customer and supplier have some implementation experience with global strategies played out at local levels.Exhibit 14-1614-*