Chapter 8 Pricing Strategy

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Chapter 8 Pricing Strategy
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Chapter 8 Pricing Strategy

• Definition of Price
• The assignment of value, or the amount the
  consumer must exchange to receive the offering
  (Solomon et al. 2008)
• Is the one element of the marketing mix that
  produces revenue the other product costs.

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Chapter 8 Pricing Strategy

• ??????????????????????????????????????????????????
  ????
• ???????????????????????????????????????????
  ??????????????????
• - Todays customer are looking for a good value
  in what they purchase.
• - To some people, a good value means a low price,
  but for some people, a good value means a good
  quality product.
• - Many types of consumers have become much more
  price-sensitive. (If a price changes, purchasing
  habit will change)

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Chapter 8 Pricing Strategy

• - Retailers have responded to their customers
  needs with retail formats that emphasize low
  prices as a means of creating a differential
  advantage.
• - National discount store chains that offer
  everyday low prices (EDLP), such as Tesco Lotus,
  Wal Mart, dominate many markets in many product
  categories.
• - A close competitor in the price-oriented market
  is the membership-only warehouse club, such as
  Makro, Sams Warehouse Club.

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Chapter 8 Pricing Strategy
6
?????????????????????????

• Skimming Objective
• ?????????????????? ????????????????
  ?????????????????????????????????
• Margin ????? ??? Volume ????????
• 2. Market Penetration Objective
• ?????????????????? ??????????????????
• Margin ????? ????????? Volume
• Market Share Objective
• Survival Objective
• Profit Objective

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????????????????????????????

• ?????????????? 3 ?????? ???
• 1. ???????????????????????????????
• 2. ???????????????????????????????????????????????
  ??????
• 3. ????????????????????
• ??????? ???? ?????? ??????????????

8
?????????????????????????????????????????

• 1. ??????????
• ???????????????????????????? ?????????????????????
  ?
• - ??????????????????????? ?????????????????????
  ?????????????????????
• 1. ??????????????????????????
• - Target Market ??????????????????????????????
  ?????
• - ??????????????????????????????
  ????????????????????????????????????????????????
• ??????? ???? ??????????????????, ??????????,
  ????????
• - ???????????????????????????????????????????

9
?????????????????????????????????????????

• 2. ??????????????????????????
• - ?????????????????????????????????????
• - ???????????????????? ???????????????????????????
  ????? (Discount Store) ???????????????????????????
  ????? ???????????????????????????????
• - ????????????????????????????????????????????????
  ?????????????????????????????

10
?????????????????????????????????????????

• ???????????????? ??? ?????????????????????????????
  ????????????????????? ????????????????????????????
  ????????????????????????? ????????????????????????
  ?????? ?????????????????????? ????????????????????
  ???????????????????????????

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?????????????????????????????????????????

• 3. ???????????????????????????????????
• - ???????????????????? ???????????????
  ????????????????????????? ???????????????
• ??????????????????????????????????????????????????
  
• ???? ????????, ????, ???????
• - ????????????????????????????????????????????????
  ??????? ???? ?????????????????????? 8 ???,
  ????????????? 7 ??? ???????
• - ???????????????????????????????????????
  (Oligopoly) ??????????????????????????????????????
  ??????????????????

12
?????????????????????????????????????????

• 2. ??????????????
• ??????????????????????? ??????????????????????????
  ???????
• ???????????????????????????????????????
• - ?????????????????????????????????????????????
  ??
• ??????? Retailing Mix ?????????????????????????
  Target Market

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Pricing Strategy

• 3. ??????????????????????
• - ???? ????????????????????????
  ?????????????????????????????????????????????????
• ??????????????????????????? ??????????????????????
  ?????????? ???? ????????????
• - ????????????????????????????????????????????
  ?????????? ???????????????????????? ??????? Mark
  up ????????????????????????????? Mark Down
  ??????????
• - ????????????????????? ???? ??? ?????
  ??????????????????????????????????????? Mark Down
  ??????????
• - ????????????????????????????????????????
  ????????????????????????????????? ????
  ?????????????, ??????? ???????

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Pricing Strategy

• Pricing Strategies
• 1 ?????????????????????????????? (Promotion
  Pricing)
• 1.1 Coupons
• - are documents that entitle the holder to a
  reduced price or amount off the actual purchase
  price of a product or service, on the shelf, at
  the cash register, and through the mail.
• - Coupons are thought to be an important sales
  promotion tool because they induce customers to
  try products for the first time, convert those
  first-time users to regular users, encourage
  large purchases, increase usage, and protect
  market share against competition.

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Pricing Strategy

• 1.2 Loss Leader Pricing or Leader Pricing
• - In leader pricing, certain items are priced
  lower than normal to increase customers traffic
  flow and/or to boost sales of complementary
  products.
• - Reasons for using leader pricing are similar to
  those for coupons. The difference is that with
  leader pricing, merchandise has a low price to
  begin with so customers, retailers, and vendors
  dont have to handle the coupons.
• - Some retailers call these products loss
  leaders.
• - In a strict sense, loss leaders are sold below
  cost. However, a product does not have to be sold
  below cost for the retailer to be using a leader
  pricing strategy.

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Pricing Strategy

• - The best items for leader pricing are products
  purchased frequently, primarily by
  price-sensitive shoppers.
• - For instance, supermarket typically use white
  bread, eggs and milk as loss leaders. The
  retailers hopes consumers will also purchase
  their weekly groceries while buying loss leaders.
• - Toy-R-Us has successfully used a leader pricing
  strategy for disposable diapers.

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Pricing Strategy

• 1.3 Rebates (??????????)
• - A rebate is money returned to the buyer based
  on a portion of the purchase price.
• Generally, the customer sends a proof of purchase
  to the manufacturer, and the manufacturer sends
  the customer the rebate.
• - Rebates are most useful when the money
  amount is relatively large. Otherwise, its not
  worth the customers time and postage to redeem
  the rebate.
• - For instance, rebates are often offered on
  cars, major and portable appliances, computers,
  and electronic products.

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Pricing Strategy

• 1.4 Low Interest Financing
• 1.5 Cent-Off Promotion ???????????????????????????
  ???
• ??????????????????????????????????????????????????
  ?????????? ?????????????????? ???? ??? Pocky
  ????????????????? 15 ??? ???????????????????????
  14.25 ???
• 1.6 ?????????????????????????? (Special-Event
  Pricing)
• - ???????????????????????????????????????
  ?????????????????? ??????????????

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Pricing Strategy

• 1.7 Pricing Bundling (??????????????????????????)
• - is the practice of offering two or more
  different products or services for sale at one
  price.
• - For example, a travel agency may sell a tour
  that includes airfare, a cruise, and meals, all
  for 1,500 (called package tour).
• - The strategy can also be used to move less
  desirable merchandise by including it in a
  package with merchandise in high demand.

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Pricing Strategy

• 1.8 Multiple-Unit Pricing (????????????)
• - is similar to price bundling, except the
  products or services are similar rather than
  different.
• - For example, a convenience store may sell 3
  liters of soda for 2.39 when the price per unit
  is 99 cents-a savings of 58 cents.
• - For example, Giordano shop in Hong Kong offers
  2 pieces of T-shirt for HKD 100 when the price
  per piece is HKD 70.

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Pricing Strategy

• - This strategy is used to increase sales volume.
• - However, some retailers abuse price bundling
  and multiple-unit prices by implying a savings
  when there really isnt one (say, 49 cents each
  or two for 98 cents-or, even worse, 49 cents each
  or three for 1.59).

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Pricing Strategy

• 2 ???????????????????????????????????
  (Discrimination Pricing)
• 2.1 ???????????????????????????? (Customer-
  Segment Pricing)
• ???? ??????????????????? ??????????????
  ??????????? ???????????????? ?????????????????????
  ??? ??????????????????????
• 2.2 ????????????????????? (Time Pricing)
• ???? ?????????????????? ???????????????
  ????????????

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Pricing Strategy

• 2.3 ????????????????????????????
• ???? ????????????????? ?????????????
  ??????????????????? ??????????????????????????????
  ???????
• 2.4 ??????????????????????????? (Store Form
  Pricing)
• ???????????????????? ??????????????????? Discount
  Store
• 2.5 ??????????????????????????????????? (Image
  Pricing)

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Pricing Strategy

• 3. ?????????????????????????????????
  (Psychological Pricing)
• 3.1 Odd Pricing
• - refers to a price that ends in an odd number
  (such as 57 bahts or 63 bahts, normally, ends
  with number 9).
• - In the 19th and early 20th centuries, odd
  prices were used to reduce losses due to employee
  theft. Because merchandise had an odd price,
  salespeople typically had to go to the cash
  register to give the customer change and record
  the sale.
• - This reduced salespeoples chances to take
  money for an item

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Pricing Strategy

• from a customer, keep the money, and never record
  the sale.
• Odd pricing was also used to keep track of how
  many times an item had been marked down.

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Pricing Strategy

• 3.2 Even Pricing

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Pricing Strategy

• 3.3 Price Lining
• - In price lining, retailers offer a limited
  number of predetermined price points within a
  classification.
• - For example, a tire store may offer tires only
  at 29.99, 49.99, 79.99.
• - ????????????????????????????????????????????????
  ?????????????????????????????????
  ??????????????????????????????????????????????????
  ??????????????????????????????????????????????????
  ????

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Pricing Strategy

• ????????????????????
• ??????????????????????????? ????????
  ???????????????????
• ??????????????? ??????????????????????????????????
  ??????????????????????????????????????????????
  ?????????????????????????????? ???????????????????
  ?????????????????????????????????????????????
• 3. ?????????????????????????? ???????????????????
  ???????????????????????? ?????????????????????????
  ?????????????????????? ????????????
  ??????????????????????????????????????????????????
  ?????

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Pricing Strategy

• 3.4 ??????????????????????????????? (Prestige
  Pricing)
• ?????????????????????????????????????????
  ???????????????????????
• 3.5 ??????????????????????????????
• ??????????????? ????????????????????
  ?????????????????????????????????????? ????
  ???????? ??????????????????
• 3.6 ?????????????????????????
• - ??????????????????????????????????????????????
  ???? ????????? ??????????? 35 ???

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Pricing Strategy

• 4. ???????????????????
• 4.1 Everyday Low Pricing (EDLP)
  (????????????????????)
• - Many retailers have adopted an everyday low
  pricing (EDLP) strategy such as Power Buys.
• - Low does not necessarily mean lowest.
• - Although retailers using EDLP strive for low
  prices, they arent always the lowest price in
  the market.
• - Since it is difficult to always have the lowest
  prices, some retailers have adopted a low price
  guarantee policy in which they guarantee that
  they will have the lowest possible price for a
  product or a group of products.
• - The promise normally includes a provision to
  refund the difference between the sellers offer
  price and the lower price.

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Pricing Strategy

• 4.2 ????????????????????? (Fictitious Pricing)
• ??????????????????
• - ?????????????????????????????????????????????
  ????????????????????????????????
  ???????????????????????????????????????????????
• - ????????????????????? ??????????????????????????
  ?????? ??????? (Cost) ????????????????????????????
  ?????? (Selling Price) ???????????????????????
  Mark-up ???????????????

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Pricing Strategy

• ??????? ??????? ?????? ??????????????
• ???? ???????????? 45 ??? ?????????????????????????
  ?? 30 ??? ??????? ???????????????? 75 ???
• ?????????? Mark up
• M R-C x 100
• R
• ??????????????? ?????????????????? Mark-up
  ?????????
• M 75 45 x 100
• 75
• 40
• - ??????? Mark-up ????????????????? ????????? 40
  ??????????

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Pricing Strategy

• Example If the initial mark-up is 56.85 , assume
  that the suggested retail price of a certain item
  is 100 baht. What are the amount mark-up and the
  merchandise cost?
• Retail Price Cost Mark-up
• 100 Cost (56.85 x Retail)
• 100 Cost 56.85
• 100 43.15 56.85
• The amount markup is 56.85 and the merchandise
  cost is 43.15

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Pricing Strategy

• Example A salesperson comes into a buyers office
  with a great new product that will cost 100.
  What will be the best retail price if the initial
  mark-up is still 56.85 ?
• Retail Cost Mark-up
• Retail 100 (56.85 x Retail)
• R 100 (.5685 x R)
• R 231.75

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Pricing Strategy

• 2. Maintained-Markup the actual sales that you
  get for the merchandise - Cost of goods sold
• Cost Mark-up Retail Price
• 18 6 24 25
  Maintained Mark-up
• - However, the initial retail price is not always
  the price at which the merchandise is ultimately
  sold. One of many adjustments to the initial
  retail price is mark-down.
• Markdowns are the reductions in the initial
  retail price.

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Chapter 13 Pricing Strategy

• Reasons for taking Markdowns
• 1. Clearance (to get rid of merchandise)
• 2. Promotional (to generate sales)
• - When merchandise is slow-moving, obsolete, at
  the end of its selling season, or priced higher
  than competitors goods, it generally gets marked
  down for clearance purposes.
• - Markdowns are also taken to increase customers
  traffic flow.

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Pricing Strategy

• Liquidating Markdown Merchandise
• No matter what markdown strategy a retailer uses,
  some merchandise may still remain unsold. A
  retailer can use one of five strategies to
  liquidate this merchandise
• 1. Job-out the remaining merchandise to another
  retailer.
• 2. Consolidate the marked-down merchandise.
• 3. Place the remaining merchandise on an Internet
  auction site like eBay or have a special
  clearance location on its own webpage.

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Pricing Strategy

• 4. Give the merchandise to charity.
• 5. Carry the merchandise over to the next season.
• The use of Break-Even Analysis
• A useful analytical tool is break-even analysis
  (BEP), which analyzes the relationship between
  total revenue and total cost to determine
  profitability at various sales levels.
• Break-even analysis has many applications in
  retailing. Just to name a few

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Pricing Strategy

• 1. Break-even volume and dollars of a new
  product.
• 2. Break-even sales change needed to cover a
  price change.
• 3. Break-even sales to cover a target profit.
• 4. Change in profit based on change in sales
  volume.
• Calculating BEP
• BEP Quantity ______Fixed Cost_______
• Unit Price - Unit variable cost

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Pricing Strategy

• For example
• -Cost of developing shirt is about 300,000,
  including executives and designers salaries,
  rent on the design teams building, and
  warehousing.
• -Management plans to sell the shirt for 12
• -Cost of the shirt is 5.
• In this example BEP quantity 42,857 units.

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Pricing Strategy

• This means the shop must sell 42,857 shirts to
  break even.
• - If the shop wishes to make a 100,000 profit.
  The break-even quantity now becomes
• BEP quantity 300,000 100,000
• 12 - 5
• 57,143 units

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Pricing Strategy

• -If it decides to reduce the selling price to
  10, calculation of BEP must be
• BEP quantity 300,000 100,000
• 10 - 5
• 80,000 units