1. PART I I PRICING STRATEGIES

2. BASIC PRICING CONCEPTS Cost-Oriented Pricing Markup pricing-difference b/t a price of an item and its cost. Usually a percentage, must include cost and expected profit Cost-plus pricing-expenses calculated for each good and then profit added, mainly used by manufacturers and service providers

3. COMPUTING COST-PLUS PRICING Print Job 40 reams paper=$400 labor=$100 materials=$60 artwork=$140 expenses=$50 profit=$50 Total price to customer=$800

4. BASIC PRICING CONCEPTS Demand Oriented Pricing determine what customers will pay for product Based on perceived value Effective when few substitutes available Same product different price based on demand--theater seating

5. BASIC PRICING CONCEPTS Competition Oriented Pricing Competitive Bid pricing- government agencies, schools Going-Rate Pricing- almost all firms do this, studying competitors to keep in-line

6. COMBINING PRICING CONSIDERATIONS Most marketers use all three to determine prices Cost-oriented used to determine the floor price Demand oriented used to determine the range Competition used to determine final price matches relation firm wants to have to competitors

7. PRICING CONSIDERATIONS Need to look at what retailers and wholesalers will charge Pricing backward from retail price 1st-retail price set, then markups desired by wholesalers & retailers, finally manufacturer’s price set Pricing forward from manufacturer’s cost 1st-wholesaler & retailer markups added, then retailers markup added, look at demand & competition, set final price

8. PRICING POLICIES One-Price-all customers charged the same. Prices quoted by means of signs and price tags, no deviations Flexible-Price -price quoted by buyer or seller, bargaining starts (cars, furniture, antiques)

9. PRODUCT LIFE CYCLE New Product Introduction Skimming-Set price high, earn high profit margin, can lower price and not insult target market, attracts competition though, may be set too high and lose sales Penetration-set initial price low to generate trial purchase of product, need mass production, promotion and distribution to be effective, block competition by capturing market, lure away from competition who is priced higher, if demand not high=losses

10. PRODUCT LIFE CYCLE PRICING Other Stages pricing in subsequent stages determined by initial pricing strategy goal during growth-keep in this stage as long as possible goal during maturity-look for new market segments goal during decline-maintain profitability

11. PSYCHOLOGICAL PRICING- TECHNIQUES THAT CREATE AN ILLUSION FOR CUSTOMERS Odd-Even Pricing-setting prices that end in odd or even numbers (odd=bargain image, even=quality image) When using round numbers, don’t use cents Price $3-4 higher than round amts. Price slightly lower, when below round numbers

12. PSYCHOLOGICAL PRICING Prestige Pricing Setting higher than average prices suggest status Many customers assume that higher prices mean higher quality Avoid exceeding customer limits, do your research

13. PSYCHOLOGICAL PRICING Multiple pricing-suggests a bargain, will sell more at 3 for.99 than at.33 each Promotional Pricing-temporary loss leader-at cost to draw to store special-event pricing-reduced in price for short period of time (24-hour sale) rebates, coupons, discounts Price Lining-all product in a given category at certain price level(need a low, middle and high level)

14. DISCOUNT PRICING-OFFERING REDUCTIONS OFF THE USUAL PRICE Cash discounts-offered to encourage quick payment of bills(2/10, net 30) Quantity discounts- encourage large orders which have lower selling costs noncumulative-one order cumulative-all orders over specified period of time

15. DISCOUNT PRICING Trade discounts-way manufacturers quote discounts to wholesalers and retailers based on list price Seasonal discounts- offered to encourage buying before or after a product’s peak season Promotional discounts- willing to promote or advertise certain product

16. STEPS IN SETTING THE PRICE Step 1-Determine Pricing Objectives volume or revenue, image Step 2-Study Costs Step 3-Estimate Demand market research Step 4-Study Competition range, floor price, ceiling price Step 5-Decide on a Pricing Strategy Step 6-Set Price