Pricing You don’t sell through price. You sell the price.

Synonyms for Price Rent Special assessment Tuition Bribe Fee Dues Fare Rate Toll Premium Honorarium Special assessment Bribe Dues Salary Commission Wage Tax

Common Pricing Mistakes Determine costs and take traditional industry margins Failure to revise price to capitalize on market changes Setting price independently of the rest of the marketing mix Failure to vary price by product item, market segment, distribution channels, and purchase occasion

Differentiated Pricing Customer-segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing

Setting Pricing Policy 1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price

Sum of the Fixed and Variable Costs for a Given Types of Costs Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production

Some important pricing definitions Utility: The attribute that makes it capable of want satisfaction Value: The worth in terms of other products Price: The monetary medium of exchange. Value Example: Caterpillar Tractor is $100,000 vs. Market $90,000 $90,000 if equal 7,000 extra durable 6,000 reliability 5,000 service 2,000 warranty $110,000 in benefits - $10,000 discount!

Predatory pricing: Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business

11/1/15 Name the Pricing Strategy

Government Regulations Affecting Price Federal and state governments have enacted laws regarding: price fixing price discrimination resale price maintenance minimum pricing unit pricing price advertising

Government Regulations Affecting Price Price fixing occurs when competitors agree on certain price ranges within which they set their own prices. Price discrimination occurs when a firm charges different prices to similar customers in similar situations.

Government Regulations Affecting Price Resale price maintenance occurs when a manufacturer forces retailers to sell an item at a minimum price. Minimum price laws prevent retailers from selling goods below cost plus a percentage for expenses and profit. Some states do not have minimum price laws and allow loss leaders, items sold at cost to attract customers.

Government Regulations Affecting Price Unit pricing allows consumers to compare prices in relation to a standard unit or measure, such as an ounce or a pound. The Federal Trade Commission (FTC) price advertising guidelines forbid fraudulent and misleading pricing advertisements.

Pricing Strategies Pricing Strategies Captive product pricing involves products that must be used along with the main product Optional product pricing takes into account optional or accessory products along with the main product 11-8