Case 32: A Shift For Lieutenant Colonel Adamseam 751

Case 32 A Shift For Lieutenant Colonel Adamseam 751 Chapter 3working

CASE 3.2 A Shift for Lieutenant Colonel Adams EAM 751 Chapter 3 Working with a partner complete CASE 3.2 Answer the 3 questions at the end of the chapter and submit. Marketing Management Fifteenth Edition Chapter 16 Developing Pricing Strategies and Programs Learning Objectives 16.1 How do consumers process and evaluate prices? 16.2 How should a company set prices initially for products or services? 16.3 How should a company adapt prices to meet varying circumstances and opportunities? 16.4 When and how should a company initiate a price change? 16.5 How should a company respond to a competitor’s price change?

Setting the Price Table 16.2 Steps in Setting a Pricing Policy include selecting the pricing objective, determining demand, estimating costs, analyzing competitors’ costs, prices, and offers, selecting a pricing method, and finally, selecting the final price. The process begins with choosing the pricing objective, such as survival, maximum current profit, maximum market share, product-quality leadership, or maximum market skimming.

Demand determination involves understanding price sensitivity and estimating demand curves through surveys, price experiments, and statistical analysis, with key concepts like price elasticity of demand. Factors reducing price sensitivity include product distinctiveness, lack of substitutes, lower relative expenditure, and others. Cost estimation considers fixed versus variable costs, total costs, and learning curves, with target costing aligning market research, desired price, and production costs to achieve profitability targets.

Analyzing competitors’ prices requires understanding their costs, pricing strategies, and potential reactions. Pricing method selection considers costs as a price floor, competitors’ prices as an orientation, and customer perception of value as a ceiling, often referred to as the three Cs model. Common methods include markup pricing, target-return pricing, perceived-value pricing, value pricing, EDLP, going-rate pricing, and auction-type pricing, each suited for different market conditions.

The final price determination takes into account the impact of marketing activities, company pricing policies, and relationships with other parties. Adaptive pricing strategies include geographical pricing, discounts, allowances, loss-leader pricing, special events, customer-specific pricing, rebates, extended payment options, warranties, and psychological pricing adjustments.

Price discrimination strategies are also significant, involving first-degree (personalized pricing), second-degree (volume discounts), and third-degree (segment-based) discrimination, as well as yield management systems used in hospitality and airline industries to optimize revenue through dynamic pricing based on demand and inventory levels.

Initiating and responding to price changes include considerations such as market dominance, avoiding price wars, and managing brand perception when implementing price cuts or increases. Price increase strategies involve delayed pricing, escalator clauses tied to inflation indices, and unbundling of product components to maintain profitability without degrading perceived value or market share.

Paper For Above instruction

Pricing strategies are fundamental to the success of organizations in competitive markets, requiring a comprehensive understanding of consumer behavior, cost structures, competitive dynamics, and value perception. Effective pricing not only influences a company's revenue and profitability but also impacts its market positioning and long-term sustainability. This paper explores the critical steps and considerations outlined in Chapter 16 of the fifteenth edition of Marketing Management, which provides guiding principles for designing and implementing effective pricing strategies.

The process begins with setting clear pricing objectives aligned with overall corporate goals. Objectives vary from survival and maximizing current profits to gaining market share or establishing a premium brand image. Recognizing the company's market position and strategic intent forms the basis for choosing appropriate pricing approaches. For instance, a firm seeking rapid market penetration may adopt penetration pricing, while one aiming for premium positioning might opt for skimming strategies.

Understanding consumer demand is pivotal. Price sensitivity and demand elasticity influence how consumers respond to different pricing levels. Estimating demand involves empirical techniques such as surveys and experiments, which help map out the demand curves. Key factors that reduce price sensitivity—like product austerity, prestige, or limited substitutes—allow firms to justify higher prices without losing customers. Conversely, highly elastic demand necessitates more cautious pricing to avoid losing market share to competitors.

Cost estimation forms the foundation for setting prices that ensure profitability. Fixed and variable costs contribute to total costs which, when understood at different production levels—especially through experience or learning curves—enable firms to determine viable price floors. Target costing further refines this process by establishing a maximum allowable cost based on the desired market price and profit margin, guiding product design and resource management to remain competitive and profitable simultaneously.

Analyzing competitors’ pricing strategies provides critical insights into the market landscape. Companies assess competitors' costs, pricing techniques, and likely reactions to adjust their own pricing policies strategically. This competitive intelligence aids in positioning, whether to match, undercut, or differentiate based on perceived value and cost structures.

The selection of a pricing method depends heavily on the company's context, including cost considerations, competitor actions, and customer perception. Markup pricing is straightforward, adding a standard margin to costs. Target return pricing emphasizes achieving specific profitability metrics, often used in capital-intensive industries. Perceived-value pricing considers the consumer’s view of the product’s benefits, enabling premium pricing for differentiated offerings. Other methods include value-based, EDLP, going-rate, and auction-based pricing, each suitable in different scenarios.

Final price setting involves additional considerations—such as marketing strategy, legal and ethical aspects, and overall brand positioning. Companies may adapt prices through geographical adjustments, discounts, allowances, or special promotions to respond dynamically to market conditions. For example, seasonal discounts or trade allowances stimulate sales during slow periods or incentivize channel partners.

Price discrimination strategies—charging different prices across segments or volume levels—maximize revenue streams and cater to diverse consumer preferences. These include first-degree (personalized), second-degree (volume discounts), and third-degree (segment-specific) discrimination. Yield management systems in airlines and hotels exemplify sophisticated demand-based pricing, optimizing capacity utilization and revenue.

Price adjustments—whether initiating cuts or hikes—must be carefully managed. Price cuts to gain market share risk perceptions of reduced quality and trigger price wars, which can be destructive. Conversely, price increases can be implemented through delayed pricing, escalator clauses linked to inflation indices, or unbundling product components. Anticipating competitors' responses and understanding market elasticity are crucial for successful price change management.

In conclusion, effective pricing strategies integrate multiple factors—costs, demand, competition, and perceived value—to formulate prices that support organizational objectives. Firms must continuously monitor market responses and adjust accordingly to maintain competitiveness and profitability. The strategic use of various pricing methods and tactical adjustments enables firms to navigate complex market environments and sustain long-term growth.

References

• Monroe, K. B. (2013). Pricing: Making profitable decisions (3rd ed.). McGraw-Hill Education.
• Nagle, T. T., & Müller, G. (2018). The strategy and Tactics of Pricing: A guide to profitable decision making (6th ed.). Routledge.
• Bragg, S. M. (2017). Pricing strategies: A marketing approach (2nd ed.). Springer.
• Smith, S. M., & Nagle, T. (2020). Value-based pricing: A practical guide to competitive strategy. Harvard Business Review Press.
• Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson.
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• Venkatesh, R., & Purao, S. (2019). Dynamic pricing and revenue management in online markets. Journal of Revenue and Pricing Management, 18(2), 102-114.