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Pricing Strategies.ppt


									Pricing Strategies

   Chapter 26
Cost-Oriented Pricing
o Markup Pricing – difference between
  cost and price
o Cost-Plus Pricing – costs and
  expenses, plus desired profit
Cost-Oriented Examples
Demand-Oriented Pricing
o   Consumer’s perceived value
o   Number of substitutes available
o   Brand loyalty
o   Minor differences – tickets, fridge
Demand-Oriented Examples
Competition-Oriented Pricing
o   Price Above
o   Price Below
o   Price In Line with Competition
o   Ignore Cost and Demand
o   Competitive-Bid Pricing
Competition-Oriented Examples
Combining Pricing Considerations
  o Cost-Oriented determines the price
  o Demand-Oriented determines range
  o Competition-Oriented determines
    relative position
  o Product to product considerations
Pricing Policies
o One-Price Policy – all customers are
  charged the same price
o Flexible-Price Policy – customers pay
  different prices for the same type or
  amount of merchandise
o Bargaining takes place with cars,
  antiques, furniture, and jewelry
o Internet sites – name your price
One-Price versus Flexible-Price
New Product Introduction
o Skimming Pricing – high price when
  demand is greater than supply
o Penetration Pricing – lower price to
  gain market share
Skimming versus Penetration
Psychological Pricing
o Techniques that create an illusion for
  customers or that make shopping
  easier for them
Odd-Even Pricing
o Setting prices that all end in either
  odd or even numbers
o Odd numbers convey a bargain
  ($9.99, $79, $845.67)
o Even numbers convey a quality image
  ($100, $20, $50)
Odd-Even Pricing
Prestige Pricing
o Higher-than-average prices suggest
  status and prestige
o Many assume higher price equals
  higher quality
Prestige Example
Multiple-Unit Pricing
o Suggests a bargain and helps to
  increase sales volume
o 3 for $99

o The 1 for $2, 2 for $3, 3 for $5
Bundle Pricing
o Several complementary products in a
  package sold at a single price
o Help to sell items that may not have
  sold on their own
Bundle Price Example
Promotional Pricing
o Loss leader
o Special event
o Rebates
Everyday Low Prices
o Low prices that are set on a
  consistent basis with no intention of
  raising them or offering discounts in
  the future
o Sales stability
o Wal-Mart is famous for this
Everyday Low Prices Example
Price Lining
o All items in a certain category are set
  at the same price. $25, $35, and $50.
o Make the price differences large
  enough to differentiate
o Allows sales people to easily offer a
  more expensive (more profitable)
Price Lining Example
Discount Pricing
o Cash Discounts – incentives to pay
  the bill early (2/10, net 30)
o Quantity Discounts – lower price for
  larger quantity
o Trade Discounts – prices to
  wholesalers versus retailers
o Seasonal Discounts – price change
  based on time of year (Christmas
  lights, mower)
Discount Pricing

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