PRICING CONSIDERATIONS _ STRATEGIES

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					   PRICING

CONSIDERATIONS
      &
  STRATEGIES
Lesson Objectives

• Identify pricing techniques that are
  used primarily in the consumer
  market

• Identify pricing techniques that are
  used primarily in business-to-
  business sales
Pricing Strategies

Two Main Strategies

1. Physiological Pricing



2. Discount Pricing
1. Psychological Pricing




Techniques that create an illusion or that
make shopping easier for customers
A. Odd/Even Pricing
 • Prices end in odd or even
   numbers

 • Odd numbers convey           $2.99
   bargain image ($19.99)

 • Even numbers convey
   quality/high end ($100.00)
B. Prestige Pricing

• Prices purposely set high to create image of
  quality

• Targeted toward markets who equate high
  price with quality

• Examples
  – Perrier Water
  – Nike – Air Jordan’s
  – Lexus
C. Multiple Pricing


• Targeted toward value-
  conscious markets         $.99 ea.
                               OR


• Example: 3 for $.99      3 for $2.50

  instead of $.33 each
D. Promotional Pricing
               • Used with sales promotions
               • Temporary price reduction
               • Designed to increase store
                 traffic
               • Loss-leader pricing
               • Special Event pricing
                  – Back-to-school
                  – 4th of July
                  – Memorial Day
  E. Price Lining
                                         Advantages
• All merchandise in one       •   Customers differentiate
  category priced at the           between value
  same price                   •   Helps customers make
• All Warm-up Suits for:           decisions
  $39.99, $59.99, and $79.99   •   Allows store to target
                                   multiple markets
• Typical in Department        •   Allows salespersons to
  Store setting                    “up sell” or “down sell”
                                   more easily
F. Yield-Management Pricing

• Pricing at different prices to maximize revenue
  when limited capacity is involved.


               Concert and Sporting
                  Event Seating
  2. Discount Pricing



•Reductions in price given based on a
buyer’s behavior
•Targeted toward industrial sales
  A. Cash Discounts
• To encourage quick payment of bill
• Example
                2/10 net 30
                    Read:
  If paid by the 10th, receive 2% discount,
                     OR
  full amount due by the 30th of the month
   3/15 net 28
Invoice (bill) = $3200
Paid on the   8 th   of the month

$3200 X .03 = $96
$3200 - $96 = $3104
B. Quantity Discounts


• Generally – the more you buy, the
  more you save
• Similar to multiple pricing for
  personal consumers
• To encourage large orders
  – Cumulative: over a period of time
  – Non-cumulative: one order/one time
C. Seasonal Discounts
           • To encourage
             purchasing in advance
             of the customary
             buying period.
           • “Early bird orders”
           • Helps organize
             production and labor
           • Off-season resort
             sales
E. Promotional Discounts

• Given for advertising or promoting
  manufacturer’s products
• % reduction in price
• Allowance - free merchandise
• Cooperative advertising – costs
  shared
Review
• What is the pricing technique used
  primarily for the consumer market?
• Name the 5 kinds of psychological
  pricing.
• What is the pricing technique used
  primarily for the industrial market?
• Name the 4 kinds of discount pricing.

				
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