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High-low pricing : charging higher prices onan everyday basis but running frequentpromotions to lower prices temporarily onselected items.Good-value pricingOffering the rightombination o
Trang 1ĐỘI TRỜI ĐẠP ĐẤTLỚP : 49K01.1
GILLETTE : SEARCHING FORTHE RIGHT PRICE IN A
VOLATILE MARKET
Trang 2pricing; Break-even pricing
II.Customer value-based
pricingVI.New Product PricingStrategy
Trang 3PriceI.
Trang 4PRICE
Price = the total value that customers
exchange/give up to obtain the benefits ofhaving or using a product or service.
The role of price:
The only element in the marketing mix that produces revenueOne of the most flexible marketing mix elements
Create customer value and build customer relationships (part of overall value proposition)Tool for capturing customer value (impact a firm's bottom line).
Trang 5Gillette Fusion Proglide 5-blade razor Gillette Mach 3 Turbo 3-blade razor
CASE STUDY
For each product line, Gillette's marketing strategy has a different price point,serving a variety of consumer groups
Trang 6Customer value-based pricing
Good-value pricingValue-added pricingII.
Trang 7Customer value-based pricing
Setting price based on buyers’ perceptions of value rather than on the seller’s cost.
Buyers’ perceptions of value (not the seller’s cost) = The key to pricing.
Price is considered along with all other
marketing mix variables before the marketingprogram is set.
Trang 9High-low pricing : charging higher prices onan everyday basis but running frequentpromotions to lower prices temporarily on
selected items.
Good-value pricing
Offering the right
ombination of quality and good service
at a fair price
EDLP: charging a constant , everyday low price with few or no temporary
price discounts Redesigning existing brands (more quality or the same quality for less)
Introducing less-expensive
versions of established, brand-name products
Trang 10Attaching value-added features and services to differentiate a company's offers and charging higher prices (rather than cutting
prices to match competitors)
Value-added pricing
Trang 11Gillette has operated on value-added pricing because the company has
always focused on innovation, and adding advanced technology or more
features per new product
Case study
Trang 12The TRAC II
The TRAC II—the first twin-blade shaving system.
That innovation launched convincing consumers that more bladesmake for a better shave
Trang 13The FUSION5 The first razor system with five blades…
Beyond its ‘ more is better’ product developments, inpursuit of the perfect shave, Gillette’s each new razorgeneration with innovations such as pivoting heads,lubrication strips, and even vibrating mechanisms And witheach product it has a different price.
Trang 14The MACH3
The first three-blade cartridge—and againin 2006 with its
Trang 15Cost-based pricing and Types of Costs Experience curve;Cost-plus pricing;
Break-even pricing
III.
Trang 16Establishing a price based on the costs for producing, distributing, and selling the product plus a reasonable return/profit ratio for the effort and risk.
Cost is an important component of a pricing strategy.
Cost-based pricing
Trang 17The simplest valuation method.
Adding a standard margin to the cost of the product.
Cost - plus pricing
Trang 18Sellers are often morecertain about costs than
More fair for bothbuyers and sellers.
Trang 20In Gillette's case, the cost ofmanufacturing a razor includes thematerials used to make the blade,handle, packaging, labor,manufacturing overhead, and otherrelated costs Once the total cost isdetermined, Gillette will add a marginto cover the desired profit margin.Markup percentages may vary basedon factors such as market conditions,competition and perceived value of theproduct.
Case study
Trang 21The drop in the average per-unit production cost that comes with accumulated production experience
Experience curve/Learning curve
Trang 22It provides usefullcomparison informationThe height of the learning curve
can let people know what tasksthey should focus upon.
Has a number of advantages compared toits competitors -> can develop a
penetration pricing strategy by settinglow prices to attract many customers.
Trang 23Complacency: The
experienced curve makesmarket leaders complacent
with their achievements,companies become lessmotivated to continuously
innovate and reduce unitcosts because of theirThe growth of a learning
curve is only as good asthe mentor that helps it
to grow
Limit
Trang 24Break-even pricing/ Target profit pricing
Setting a price to break even the production andmarketing costs for a product or setting a price tocreate a desired profit (target profit).
Trang 25Formula to calculate break-even volume
Fixed costs: are costs that do not change compared to output, such as rent, salaries, construction machinery, etc.
The break-even volume is the price at which that unit or product is sold Variable costs per unit or product are prices where units or products are variable costs incurred to create a product or unit.
Formula to calculate volume to achieve target profit
Trang 26Break-even point chart
A chart showing total costs and estimated total revenue at different output levels
Trang 27Competition - based pricing Is setting prices based on competitors' strategies, costs, prices and products.
"What price should I sell at compared to competitors' prices?"
Consumers will judge the value of a productbased on the prices that competitors chargefor similar products.
Trang 28During Gillette's decline period, Direct sales competitors and retailers launched new offerings to outpace the competition, typically when many users were unable to notice What's the difference between shaving with a MACH3 blade and shaving with a similar 3-blade blade sold under Walmart's Equate brand or Costco's Kirkland Signature brand With store brand prices falling to just $1 per blade, many customers have no reason to pay a high cost for Gillette's product.
Case study
Trang 29The value of the company's products compared to competing products
+ The value of the company's products is lower than that of competitors => Lower prices and change customer perceptions to increase selling prices
+ The value of the company's products is higher than that of competitors => Selling at high prices
How strong are your current competitors and what are their current pricing strategies?
+ Many small competitors, selling at high prices => The company must apply lower prices => Pushing competitors out of the market
+ Large competitors, selling at low prices => The company targets niche markets with value-added products at higher prices
Evaluating your competitor’s pricing strategies
Trang 30As its company grows, Gillette has seen its decline come from a new generation of direct-to-consumer competitors, startups like Dollar Shave Club and Harry's have released quality blades at a fraction of the price, with the convenience of online shopping and home delivery, and Gillette also faces fierce competition from retailers, they sold each blade for $1, which left many customers seeing no reason to pay Gillette's high price In response to challenges from DTC and store brands, Gillette has launched its own online service – currently called Gillette On Demand – that sells similar products at the same price with higher product quality And it was quite successful when people who loved Gillette responded to purchasing through this channel.
Case study
Trang 31Price-Demand Relationship and Price Elasticity
V.
Trang 32Demand curve
Each price the company might chargewill lead to a different level of demand=> Demand Curve
A curve that shows the number of units themarket will buy in a given time period, at differentprices that might be charged
Demand curves differ by:
-Type of product (normal vs luxury)
-Type of market ( Monopoly vs Competition)
Demand curve
Trang 33Price elasticity
Definition: A measure of sentivity of demand to changes in price
When the price of CD increased from $20 to $22, the quantity of CDs demanded decreased from 100 to 87.What is the price elasticity of demand for CDs?
Trang 35NEW PRODUCT PRICING STRATEGY
Marketing-Skimming PricingMarketing-Penetration Pricing
Trang 36Setting a high price for a new product to skim maximum revenues
layer by layer from the segments willing to pay the high price.
MARKET-SKIMMING PRICING
Trang 37Conditions of application:
The product’s quality and image must support its higher price, and enough
buyers must want the product at that price.
The costs of producing a smaller volume cannot
be so high that they cancel the advantage of
charging more.
Competitors should not be able to enter the
market easily and undercut the high
price.
Trang 38Introducing new products at high prices while
reducing the prices of existing Gillette razors
Case study
Expensive price tag but attracted
a customer base
Trang 39Setting a low price for a new product a large number of buyers and a large market share (penetrate the market quickly and deeply)
The high sales volume results in falling costs, allowing companies to cut their prices even further
Conditions of application
The market must be highly price sensitive so that a low price produces more market growth
Market-penetration pricing
Production and distribution costs must decrease as sales volume increases
The low price must help keep out the competition, and thepenetration pricer must maintain is low price position
Trang 40PRODUCT MIX PRICING STRATEGIES
Product line pricing
Trang 41Setting the price steps between various products in a product line
Trang 43Optional product pricing
The Pricing of optional or accessory products alone with a main product.
Companies must decide
Which items to include in the base price
Which to offer as options
Trang 44By selling new, innovative products only through the Gillette On Demand website,
Gillette Proglide 5+1 Power product is priced up to $200
plus an additional $25 for a 6-pack replacement blades
Case study
25$
Trang 45Captive-product pricing
Setting a price for products that must be used along with a main product
Finding the right balance between the main product and captive product prices
2 parts
In the case of services
The price of the service is broken into: A fixed fee + a variable usage rate
Trang 46Seeks a market for by-products
Having no value and getting rid of them is costly
Turn out to be profitable
Offset the costs of disposing of them
Make the main product’s price morecompetitive
Trang 47products and offering the bundle at a reduced price
The combined price must be low enough to get them
to buy the bundle
Trang 49A straight reduction in price on purchases during a started period of time or of larger quantities
Forms of discount
Cash discount
A price reductionto buyers who paytheir bills promptly
functions, such as selling,storing, and record
Trang 50Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way
Another type of listed price reduction
Trade-in allowance:
A discount if returning an old product when purchasing a new product Usually applied to durable goods (cars, cameras)
Promotional allowance:
Payments or price reductions to rewarddealers for participating in advertising ansales support programs
Trang 51Segmented pricing
Must be legal.
The selling of a product or service at two or more different prices even though this difference in price is not based on a difference in cost.
The costs of segmenting and reaching the
market cannot exceed the extra revenue
obtained from the pricedifference.
Trang 52pay different prices
for the same
A firm varies itsprice by the season,the month, the day,
and even the hour
Time-based pricing
Trang 53Geographical pricing
Setting prices for customers in different areas within a country or around the world.
Decision: High prices for far away customers to offset shipping costsPrices are the same for all customers, regardless of location
Trang 54Zone pricing:
Businesses determine manydifferent regions and customers inthe same region pay the same total
price, the more distant the zone,the higher the price.
pricing strategies
FOB-origin pricing:
Pricing in which goods are placedfree on board a carrier; the
customer pays the freight from thefactory to the destination
Uniform-delivered pricing:
Businesses charge the same priceplus freight to all customers,
regardless of their location.
Basing-point pricing:
Seller designates a certain
location/city as the basing point andfreight costs are charged for allcustomers from that location to the
customer's location.
Freight-absorption pricing:
The seller absorbs all or part of thefreight charges in order to get the
desired business.
Trang 55Dynamic pricing
The continuous adjustment of prices to meet the characteristics and needs of individual customers and each situations
Online shopping ( real-time pricing )Bidding on auction sites (eBay )
Trang 56Pricing that considers the psychology of prices, not simply economic factors The price says something about the product.
When purchasing, consumers do not have enough skills, resources,capabilities, and information necessary to evaluate all products.
Trang 58Promotional pricing
Temporarily pricing a product below the listed price, or sometimes even lower than the cost, for the purpose of increasing short-term sales (creating
excitement and urgency for product purchases)
Personalized pricing
Adjusting prices in real time to fit individual customer's needs,situations, locations, and purchasing behaviors.
Trang 59Case Study Discussion
Based on the concept of consumer-value based
pricing, explain Gillette'srise to market dominance.
Trang 60• Understanding the customer: Gillette's marketing team has completely shifted its focus to understanding customers and the obstacles they face every day Extensive market researching and focusing group interviews
have highlighted the key issues consumers in each market face when shaving Once a brand understands what customers want, delivering that product becomes easy.
• Besides offering a customized product, the brand also ensures that the product is affordable for the consumers • Never be afraid to innovate and invest The better customized the product, the higher the consumer satisfaction
and the higher the revenue.
Answer
Trang 61Thanks for listening