Pricing Strategies

1
Pricing Strategies

• Chapter 26

2
Cost-Oriented Pricing

• Markup Pricing difference between cost and
  price
• Cost-Plus Pricing costs and expenses, plus
  desired profit

3
Cost-Oriented Examples
4
Demand-Oriented Pricing

• Consumers perceived value
• Number of substitutes available
• Brand loyalty
• Minor differences tickets, fridge colors

5
Demand-Oriented Examples
6
Competition-Oriented Pricing

• Price Above
• Price Below
• Price In Line with Competition
• Ignore Cost and Demand
• Competitive-Bid Pricing

7
Competition-Oriented Examples
8
Combining Pricing Considerations

• Cost-Oriented determines the price floor
• Demand-Oriented determines range
• Competition-Oriented determines relative position
• Product to product considerations

9
Pricing Policies

• One-Price Policy all customers are charged the
  same price
• Flexible-Price Policy customers pay different
  prices for the same type or amount of merchandise
• Bargaining takes place with cars, antiques,
  furniture, and jewelry
• Internet sites name your price

10
One-Price versus Flexible-Price
11
New Product Introduction

• Skimming Pricing high price when demand is
  greater than supply
• Penetration Pricing lower price to gain market
  share

12
Skimming versus Penetration
13
Psychological Pricing

• Techniques that create an illusion for customers
  or that make shopping easier for them

14
Odd-Even Pricing

• Setting prices that all end in either odd or even
  numbers
• Odd numbers convey a bargain (9.99, 79,
  845.67)
• Even numbers convey a quality image (100, 20,
  50)

15
Odd-Even Pricing
16
Prestige Pricing

• Higher-than-average prices suggest status and
  prestige
• Many assume higher price equals higher quality

17
Prestige Example
18
Multiple-Unit Pricing

• Suggests a bargain and helps to increase sales
  volume
• 3 for 99
• The 1 for 2, 2 for 3, 3 for 5 dilemma

19
Multiple-UnitExample
20
Bundle Pricing

• Several complementary products in a package sold
  at a single price
• Help to sell items that may not have sold on
  their own

21
Bundle Price Example
22
Promotional Pricing

• Loss leader
• Special event
• Rebates

23
Everyday Low Prices

• Low prices that are set on a consistent basis
  with no intention of raising them or offering
  discounts in the future
• Sales stability
• Wal-Mart is famous for this

24
Everyday Low Prices Example
25
Price Lining

• All items in a certain category are set at the
  same price. 25, 35, and 50.
• Make the price differences large enough to
  differentiate
• Allows sales people to easily offer a more
  expensive (more profitable) alternative

26
Price Lining Example
27
Discount Pricing

• Cash Discounts incentives to pay the bill early
  (2/10, net 30)
• Quantity Discounts lower price for larger
  quantity
• Trade Discounts prices to wholesalers versus
  retailers
• Seasonal Discounts price change based on time
  of year (Christmas lights, mower)

28
Discount Pricing