Objective 3.03: Demonstrate ways to compute client costs of goods and services.

There are many factors that affect pricing

Economic Factors Supply: the amount of goods or services that producers are willing to provide Demand: the amount of goods or services that buyers are willing to purchase.

Competition How your competition is pricing their product or service may determine how YOU will price yours.

Costs and Expenses In order to make a profit, your prices must be set to exceed your costs and expenses.

PRICING STRATEGIES

Demand-based Pricing Set your price according to what customers are willing to pay Must have a good understanding of the consumer’s perception of the product or service.

Competition-based Pricing Determine your competitor’s pricing. Then: Price below the competition Price above the competition Price in line the with competition.

One-Price Policy All customers pay the same price.

PRICING TECHNIQUES

Psychological Pricing – price is based on the customer’s perception Prestige pricing: higher than average price to suggest exclusiveness, status, prestige.

Psychological Pricing cont. Odd/Even pricing Odd prices suggest bargains – 4.99 Even pricing suggest higher quality – 5.00.

Discount Pricing – reductions from the usual price of a product or service Cash discounts: encourage prompt payment

Discount Pricing cont. Quantity discounts: offered to buyers for placing large orders

Discount Pricing cont. Promotional discounts: offered to sellers who are willing to promote a product or service

Discount Pricing cont. Seasonal discounts: offered to buyers who are willing to buy in advance of customary buying season.

CALCULATING PRICES

Markup Amount added to the cost of an item to cover expenses and ensure profit Markup can be based on: A standard percentage the business needs per item to cover expenses The markup of competitors The average markup for the industry.

Calculating Cost, Retail, Markup, and Markup Percentage Markup / Cost = Percentage of Markup $5.00 / $15.00 = 33% Retail - Markup = Cost $ $5.00 = $10.00 Cost + Markup = Retail Price $ $15.00 = $40.00 Cost x Markup % = $ Markup $10.00 X 150% = $15.00

Group Practice “Retail Pricing” “Markup” Individual Practice “Calculate Price”