3 Pricing Strategies: Market Skimming Applies to new, distinctive products, early in the Product Life Cycle
4 Pricing Strategies: Market Skimming Common when there is little competitionSet the price high and reach BEP quicklySometimes used to limit demand if you cannot produce enough to meet heavy demandInitial high price attracts wealthy trendsettersMost new consumer electronic products practice this pricing techniqueThe iPod was priced $259 in 2004.The PS3 was priced$599 in 2007.
5 Pricing Strategies: Captive Product Pricing Products that require a “refill” component can command a captive price. Examples are cartridges for razors, water filters and printers…
12 Pricing Adjustment Strategies Types of segmented pricing strategies:Product-line pricingLocation pricingTime pricingAlso called revenue or yield managementCertain conditions must exist for segmented pricing to be effectiveDiscount / allowanceSegmentedPsychologicalPromotionalCompetitive
13 Pricing a Product-Line Pricing Adjustment Strategies: SegmentedPricing a Product-Line
17 Pricing Adjustment Strategies The price is used to say something about the product.Price-quality relationshipReference pricesDifferences as small as five cents can be importantNumeric digits may have symbolic and visual qualities that psychologically influence the buyerDiscount / allowanceSegmentedPsychologicalPromotionalCompetitive
18 Psychological Pricing Psychological pricing occurs when sellers consider the psychological factors of price. The price tag on a pair of moccasin UGG slippers is $100. The price on a pair that looks almost identical, sold at L.L. Bean is half that at $ The difference in price is not due to a drastic difference in quality, both are made from sheepskin and both have indoor/outdoor soles, the difference in price is an example of psychological pricing.The UGG Slipper: $100Psychological PricingThe L.L. Bean Slipper: $49.95
24 Pricing Adjustment Strategies: Promotional Loss LeaderGood or service advertised and sold at below cost price. Its purpose is to bring customers in the store (usually a supermarket) on the assumption that, once inside the store, customers will be stimulated to buy full priced items as well.
26 Pricing Adjustment Strategies most popular strategyproducts in a specific category match/follow competitors closelycompanies compete using something other than price: ads, promos, distribution, product featuresmanufacturer with largest market share, first product, or longest on market sets benchmark priceothers compare their product, set their price in relation (remember costs vs benefits = value)Discount / allowanceSegmentedPsychologicalPromotionalCompetitive
27 Pricing Adjustment Strategies Competitive Pricing- some retailers have a strict competitive price policy and will meet or beat others’ prices- some stores hire competitive shoppers who research the competition to ensure best price
28 Pricing Adjustment Strategies: Competitive No Loss Leader => Every Day Low (or Competitive) Pricing