Presentation is loading. Please wait.

Presentation is loading. Please wait.

19 Pricing Concepts Professor Close. Introduction to Pricing (1) Pricing strategy (nothing you buy is priced too high) –Definition: value given up for.

Similar presentations


Presentation on theme: "19 Pricing Concepts Professor Close. Introduction to Pricing (1) Pricing strategy (nothing you buy is priced too high) –Definition: value given up for."— Presentation transcript:

1 19 Pricing Concepts Professor Close

2 Introduction to Pricing (1) Pricing strategy (nothing you buy is priced too high) –Definition: value given up for benefits firm offers (fuzzy: good deal varies; real estate) Positive: easiest p to change; determines revenues Negative: difficult to evaluate; different to gain advantage

3 Introduction to Pricing (2) Pricing Strategy (cont…) –Reference price: consumers ideas of what price should be (What for gallon gas? CD? Movie?) –Flexibility Administered prices –Firms decide on price vs mkt. (fluctuation is relatively uncommon) –Channel conflict (MSRP)

4 Introduction to Pricing (3) Pricing Strategy (cont…) –Flexibility One price: same price to all under same conditions Flexibility: price differs by customer; negotiation Problem: dissatisfaction; searching for deals (texts) Easier now – tech (freq. Shopper) Name your price (PriceLine) (-) –Some dislike (autos) –Customer satisfaction –Habit forming (U.S. autos)

5 Priceline Commercial

6 Pricing Objectives (1) Sales Oriented: amount sold in units, dollars, mkt share – no ref. to profit Market share: part of industry/area sales Measurement is easy Problem: must have some profit (large sales profits; Eastern airlines; dot-coms)

7 Pricing Objectives (2) Status Quo Oriented: Happy where we are (problem: not strategic; Taco Bell) Form: non price competition; meet competition –Ex. avoid price war –Focus on other ps –Why? (emphasize quality; & only one low price) –What products can you think of??

8 Taco Bell Commercial

9 Pricing Objectives (3) Profit Oriented Target return –Profit rel. to financial yardstick (sales, invest, industry avg.) –(+) objective (driven by quarterly earnings) –Satisfactory profits: lifestyle, utilities Profit maximization: most earnings possible… –Not necessarily high price (W-Mart; mass merch. Concept) –Should be goal of business –Trick: how do you know?

10 Pricing Objectives (4) Allowances and Discounts Awarded for giving something up or doing it yourself Forms –Sale (500) temporary reduction in list price; adjust inventory quickly (excitement) –Quantity disct: decrease for buying more »May be price cuts or additional goods (movie rentals; freq. Flier) –Cumulative: »For buying over time (Subway; buy ten, one free) »Loyalty –Non-cumulative: »For one purchase »Decrease storage

11 Pricing Objectives (5) Allowances and Discounts (cont…) ad allowance: price reduction for downstream ads stocking allowance –pay for retail space (Wal-Mart) –mainly for new (justify: costs)

12 Pricing Objectives (6) Allowances and Discounts (cont…) –Push money/spiffs/p.m. –Retailer incentives for aggressive selling (target: sales force) –Question: incentives –Trade-in: price reduction for old items –Seasonal: unpopular times (storage; heating oil)

13 Payment Terms Net: full amount Cash Discount: reduction to pay early 2/10, net 30: –2% discount if paid w/in 10 days; –full payment due in 30 (BIG take anyway)

14 Summary Objectives: sales – status quo - profit Allowances & discounts Administered vs. flexible Read: –Robinson-Patman Act (pg ) –Skimming/Penetration Pricing (pg )


Download ppt "19 Pricing Concepts Professor Close. Introduction to Pricing (1) Pricing strategy (nothing you buy is priced too high) –Definition: value given up for."

Similar presentations


Ads by Google