1. Pricing Strategies

2. 3 Basic Pricing Concepts

3. 1. Cost Oriented Pricing Markup Pricing Cost Plus Pricing
The difference between the price of an item and its cost. Usually expressed as a percentage.
Cost Plus Pricing
Similar to markup pricing, but calculates costs based on the item and situations.

4. 2. Demand -Oriented Pricing
Marketers determine what present consumers are willing to pay for given goods and services.
You will pay more for close-up seats at a sporting event.
You pay more for phone calls during peak times.

5. 3.Competition-Oriented Pricing
Competitive Bid Pricing
determining the price for a product on the basis of bids submitted by competitors to a company or government agency.
Going Rate Pricing
Involves studying the competition’s prices to be sure one’s own prices are inline.

6. Combined Pricing Strategies
Using the three basic pricing strategies together to determine the price of a product or service.

7. One-Price Policy vs. Flexible -Price Policy
All consumers are charged the same amount for a product.
Flexible-price policy
People bargain for a price
used cars
furniture

8. The Product Life Cycle

9. 1.New Product Introduction
Can use two different price techniques
Skimming pricing
sets a very high price for a new product based on high demand for the product.
Trendsetters will buy.
High prices attract competition.

10. 2. Penetration Pricing Setting the price of a new product very low.
Try to get as many people as possible to buy the product to gain market share.
Take customers from the competition who are charging higher prices.

11. 3. Growth
Sales increase rapidly an total costs per unit decrease because volume absorbs the fixed costs.
Marketers want to stay in this stage as long as long as possible.

12. 4. Maturity
The sales begin to level off because demand is cut in half.
The goal is to stretch the life of the product or add new features or improvements to revitalize the product.

13. 5. Decline When sales decrease and profit margins are reduced.
To remain profitable, marketers try to reduce costs of manufacturing, or they cut back their advertising and other promotional activities.

14. Psychological Pricing
Techniques that create an illusion for customers or that make shopping easier form them.

15. 1. Odd-Even Pricing
A technique that involves setting prices that all end in either odd or even numbers is known as odd-even pricing.
Some retailers end all regular price merchandise in .00 and sale merchandise in .99.

16. 2.Prestige Pricing
The practice of setting prices higher-than-average to suggest status and prestige to the customer.
Examples:
Lenox China
Rolls Royce
Waterford crystal

17. 3.Multiple Pricing
Multiple pricing suggests a bargain and helps to increase sales volume.

18. 4.Promotional Pricing Loss leader pricing Special event pricing
offering an item for sale at cost or slightly above.
Special event pricing
Rebates, coupons, special discounts.
Prices go back to normal after the event.

19. 5.Price Lining Stores that offer merchandise at specific prices.
Determined by the company
should represent low, medium and high prices

20. Sellers offer reductions from the usual price.
Discount Pricing
Sellers offer reductions from the usual price.

21. 1. Cash Discounts
Cash discounts are offered to buyers to encourage them to pay their bills quickly.
2/10 net 30 means 2% discount if paid in 10 days, otherwise the bill is due in 30 days.

22. 2. Quantity Discounts Discounts offered for placing large orders.
Non-cumulative quantity discounts are offered on one order
Cumulative quantity discounts are for purchases placed over a period of time

23. 3.Trade Discounts
The way manufacturers quote prices to wholesalers and retailers.
They may give members of the distribution channel a discount from the list price.

24. 4. Seasonal Discounts Discounts for buying early.
Early bird discounts
Resorts have “off season rates”

25. 5.Promotional Discounts and Allowances
Discounts that are offered to wholesalers and retailers who are willing to promote a manufacturer’s products.

26. 6 Steps for Determining Price
1. Determine price objectives
2. Study costs
3. Estimate Demand
4. Study Competition
5. Decide of a Pricing Strategy
6. Set Price