Product / Price / Promotion / Place Marketing... Product / Price / Promotion / Place

Pricing Strategies Quality Low High Economy Pricing Market Penetration Price Market Skimming Premium Pricing High

Pricing Strategies: Market Skimming Applies to new, distinctive products, early in the Product Life Cycle

Pricing Strategies: Market Skimming Common when there is little competition Set the price high and reach BEP quickly Sometimes used to limit demand if you cannot produce enough to meet heavy demand Initial high price attracts wealthy trendsetters Most new consumer electronic products practice this pricing technique The iPod was priced $259 in 2004. The PS3 was priced $599 in 2007.

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…

Pricing Strategies: Common Pricing Mistakes…

Pricing Strategies: Economy Pricing

Pricing Strategies: Premium Pricing

Pricing Adjustment Strategies Types of discounts Cash discount Quantity discount Seasonal discount Allowances Trade-in allowances Promotional allowances Discount / allowance Segmented Psychological Promotional Competitive

Pricing Adjustment Strategies: Discount / allowance Quantity discount Cash discount

Pricing Adjustment Strategies: Discount / allowance Seasonal Discounts Trade-in allowances

Pricing Adjustment Strategies Types of segmented pricing strategies: Product-line pricing Location pricing Time pricing Also called revenue or yield management Certain conditions must exist for segmented pricing to be effective Discount / allowance Segmented Psychological Promotional Competitive

Pricing a Product-Line Pricing Adjustment Strategies: Segmented Pricing a Product-Line

Pricing Adjustment Strategies: Segmented

Segmented Pricing Strategies: Time Pricing

Pricing Adjustment Strategies: Segmented

Pricing Adjustment Strategies The price is used to say something about the product. Price-quality relationship Reference prices Differences as small as five cents can be important Numeric digits may have symbolic and visual qualities that psychologically influence the buyer Discount / allowance Segmented Psychological Promotional Competitive

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 $49.95. 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: $100 Psychological Pricing The L.L. Bean Slipper: $49.95

Pricing Adjustment Strategies: Psychological

Pricing Adjustment Strategies: Psychological

Pricing Adjustment Strategies Temporarily pricing products below the list price or even below cost Contracts, Special-event pricing Cash rebates Low-interest financing, warranties Loss leaders Discount / allowance Segmented Psychological Promotional Competitive

Pricing Adjustment Strategies: Promotional

Pricing Adjustment Strategies: Promotional

Pricing Adjustment Strategies: Promotional Loss Leader Good 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.

Easily copied by competitors Creates deal-prone consumers Pricing Adjustment Strategies: Promotional Challenges: Easily copied by competitors Creates deal-prone consumers Erode brand value Industry Price Wars

Pricing Adjustment Strategies most popular strategy products in a specific category match/follow competitors closely companies compete using something other than price: ads, promos, distribution, product features manufacturer with largest market share, first product, or longest on market sets benchmark price others compare their product, set their price in relation (remember costs vs benefits = value) Discount / allowance Segmented Psychological Promotional Competitive

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

Pricing Adjustment Strategies: Competitive No Loss Leader => Every Day Low (or Competitive) Pricing

Pie Chart humour…