Presentation is loading. Please wait.

Presentation is loading. Please wait.

19 Pricing Concepts Professor Close.

Similar presentations

Presentation on theme: "19 Pricing Concepts Professor Close."— Presentation transcript:

1 19 Pricing Concepts Professor Close

2 Introduction to Pricing (1)
Pricing strategy (nothing you buy is priced too high) Definition: value given up for benefits firm offers (fuzzy: good deal varies; real estate) Positive: easiest “p” to change; determines revenues Negative: difficult to evaluate; different to gain advantage

3 Introduction to Pricing (2)
Pricing Strategy (cont…) Reference price: consumers’ ideas of what price “should” be (What for gallon gas? CD? Movie?) Flexibility Administered prices Firms decide on price vs mkt. (fluctuation is relatively uncommon) Channel conflict (MSRP)

4 Introduction to Pricing (3)
Pricing Strategy (cont…) Flexibility One price: same price to all under same conditions Flexibility: price differs by customer; negotiation Problem: dissatisfaction; searching for deals (texts) Easier now – tech (freq. Shopper) “Name your price” (PriceLine) (-) Some dislike (autos) Customer satisfaction “Habit” forming (U.S. autos)

5 Priceline Commercial

6 Pricing Objectives (1) Sales Oriented: amount sold in units, dollars, mkt share – no ref. to profit Market share: part of industry/area sales Measurement is easy Problem: must have some profit (large sales  profits; Eastern airlines; dot-coms)

7 Pricing Objectives (2) Status Quo Oriented:
Happy where we are (problem: not strategic; Taco Bell) Form: non price competition; meet competition Ex. avoid price war Focus on other p’s Why? (emphasize quality; & only one low price) What products can you think of??

8 Taco Bell Commercial

9 Pricing Objectives (3) Profit Oriented Target return
Profit rel. to financial yardstick (sales, invest, industry avg.) (+) objective (driven by quarterly earnings) Satisfactory profits: lifestyle, utilities Profit maximization: most earnings possible… Not necessarily high price (W-Mart; mass merch. Concept) Should be goal of business Trick: how do you know?

10 Pricing Objectives (4) Allowances and Discounts
Awarded for giving something up or doing it yourself Forms Sale (500) temporary reduction in list price; adjust inventory quickly (excitement) Quantity disct: decrease for buying more May be price cuts or additional goods (movie rentals; freq. Flier) Cumulative: For buying over time (Subway; buy ten, one free) Loyalty Non-cumulative: For one purchase Decrease storage

11 Pricing Objectives (5) Allowances and Discounts (cont…)
ad allowance: price reduction for downstream ads stocking allowance pay for retail space (Wal-Mart) mainly for new (justify: costs)

12 Pricing Objectives (6) Allowances and Discounts (cont…)
Push money/spiffs/p.m. Retailer incentives for aggressive selling (target: sales force) Question: incentives Trade-in: price reduction for old items Seasonal: unpopular times (storage; heating oil)

13 Payment Terms Net: full amount Cash Discount: reduction to pay early
2% discount if paid w/in 10 days; full payment due in 30 (BIG take anyway)

14 Summary Objectives: sales – status quo - profit Allowances & discounts
Administered vs. flexible Read: Robinson-Patman Act (pg ) Skimming/Penetration Pricing (pg )

Download ppt "19 Pricing Concepts Professor Close."

Similar presentations

Ads by Google