1. Chapter 26
marketing

2. Chapter 26 (section 1)

3. Basic pricing concepts
Demand oriented pricing
Based on consumer perception
Heavily Reliant upon supply & demand
Competition oriented pricing
Based on competitor pricing
Below, in line (going rate pricing), above (premium pricing)
No relation to cost or supply & Demand
Cost oriented pricing
Based on cost (variable & fixed)
Markup
Resellers + markup

4. Costs? Supplier (B2B) Manufacturer / distributer (b2b)
Labor
Capital (mining / drilling / planting / harvesting)
Raw Material
Fixed costs / variable costs
Markup / Profit
Manufacturer / distributer (b2b)
Capital (Assembly / manufacturing)
Material
Markup / profit
Retailer (consumer / b2b)
labor
Capital (sales & displays)
Wholesale price (Material)

5. equations Markup = retail price – wholesale price
Retail price = wholesale price + markup
Profit = retail price – wholesale cost – shipping – taxes – other related costs

6. Establishing price base
Cost oriented pricing
Understand the price floor (bottom / breakeven) for a product
Demand oriented pricing
Establishes a price range (price floor – price ceiling)
Competition oriented pricing
Establishes a set price with wiggle room to drop the price for sales

7. One price vs. flexible price policy
Customers are charged the same price
Retail stores employ this policy
i.e. iphone (store may offer different incentives though like store credit)
Flexible price
Customers pay different prices based on type or quantity
Used cars
Pricing tiers based on quantity (wholesale)

8. Product life cycle Introduction Growth Maturity Decline / reinvention
Price skimming – high price
Price penetration – low price (everyday low price)
Growth
Price skimming – become flexible based on S & D
Price penetration – stays constant for the most part
Maturity
Price skimming – price decreases
Price penetration – price decrease
Decline / reinvention
Price penetration – price decreases

9. Time out! Think of a product (not a phone)
Think about when that product was first introduced
How much was it?
Penetration pricing or price skimming?
Think about when that product increased in sales
Think about when that product matured

10. Chapter 26 (Section 2)

11. Product mix strategy Price lining Captive product By-product
T-shirts 5 10 15
Captive product
Printer $100
Ink $100
By-product
Landfill
Selling off methane to power electrical plants or trucks
Bundle pricing
Iphone comes with imovie
Computer comes with one year of free anti-virus

12. Geographical pricing City? Suburb? Rural? Northern united states
Southern united states
New york & california vs. iowa

13. International pricing
Currency exchange
Shipping
Distribution
Availability
culture

14. Segmented pricing Time Location Design
Buyer identification or demographic

15. Psychological pricing
Odd-even pricing
Prestige pricing
Premium product = premium pricing
Multiple unit pricing
3 tennis balls for 3 dollars (hard to find individual tennis balls / golf balls)
Everyday low prices
Consistent low prices = no sales / discounts
Loss leader
Xbox / iphone / black Friday sale
Special event pricing
This week only / holiday sale / seasonal discount
Rebates & coupons
Manufacturer incentives to buy a product – new cars

16. Discounts & allowances
Cash discount
Quantity discount
Trade discount
Seasonal discount
allowances

17. Determining prices Establish pricing objectives Determine costs
Estimate demand
Study the competition
Decide on pricing
Set prices

18. Pricing technology Vehicles Smart pricing
Magazines
Newspapers
Posters/signage
Smart pricing
Utilizing big data & software
Communicating pricing to consumers
Electronic shelves
Digital price labels (change easily)