Pricing Strategies - PowerPoint by S84ZBv4k


									Pricing Strategies
           Factors Affecting Price Setting

• Pricing Objectives
   – profit
   – competition
   – market share
• Cost
   – ratio of fixed costs to variable costs
   – economies of scale available to the firm
   – cost structure of a firm relative to its competitors
• Competition
• Demand
         Classification of Price Strategies

• Differential Pricing
   – same brand sold at different prices to consumers

• Competitive Pricing
   – prices are set to exploit competitive position

• Product Line Pricing
   – related brands are price to exploit mutual dependencies
           Differential Pricing Strategies

• Second Market Discounting
   – a firm sells its product in a secondary market at a discount

• Periodic Discounting
   – hold price during “prime period” and discount to take advantage of
     price sensitive customers

• Random Discounting (i.e., sales)
   – rely on uninformed consumer to pay regular price, yet take
     advantage of those that search for the lowest price
            Competitive Pricing Strategies

• Penetration Pricing
   – pricing as low as possible to take control of the market and keep
     competition out
• Experience Curve Pricing
   – exploiting experience in manufacturing, marketing, etc. and
     economies of scale in pricing
• Price Signaling
   – use price to signal quality
• Geographic Pricing
   – basing price on geographic area
       •   FOB
       •   zone pricing
       •   uniform delivered pricing
       •   freight absorption pricing
           Product Line Pricing Strategies

• Price Bundling
   – pricing two or more products as a bundle at a price better than the
     aggregate prices of the items in the bundle
• Premium Pricing
   – pricing different versions of the product at different prices to exploit
     consumer heterogeneity in demand
• Image Pricing
   – a firm brings out an identical version of its current product with a different
     name (or model number) and a higher price
• Complementary
   – pricing such that the loss in the sales of one product is covered by the
     profit from the sale of a relate product
       • captive pricing
       • two-part pricing
       • loss leader pricing
              Government Regulation

• Price Fixing

• Deceptive Pricing

• Price Discrimination

• Promotional Pricing

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