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

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

Setting Prices Discount Pricing Discount pricing involves the seller's offering reductions from the usual price. They include: cash quantity trade seasonal discounts promotional discounts and allowances

Discount Pricing Cash discounts are offered to buyers to encourage them to pay their bills quickly. Quantity discounts are offered to buyers for placing large orders. Noncumulative quantity discounts are offered on one order. Cumulative quantity discounts are offered on all orders over a specified period of time.

Discount Pricing Seasonal discounts are offered to buyers willing to buy at a time outside the customary buying season. Promotional discounts are offered to wholesalers and retailers willing to advertise or promote a manufacturer's products. Allowances are granted to customers for selling back an old model.

Steps in Setting Prices These are the six steps in determining a price for an item: 1. Determine pricing objectives. 2. Study costs. 3. Estimate demand. 4. Study competition. 5. Decide on a pricing strategy. 6. Set price.

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

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!