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Product Pricing

Product Pricing. ApEc 4451. General Retail Strategies. EDLP (everyday low pricing): - Aimed at pricing continuity. - Strive for low price, but not always the lowest. - Low price guarantee policy. - Trend toward. High/low pricing:

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Product Pricing

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  1. Product Pricing ApEc 4451

  2. General Retail Strategies • EDLP (everyday low pricing): - Aimed at pricing continuity. - Strive for low price, but not always the lowest. - Low price guarantee policy. - Trend toward. • High/low pricing: - Maintain a regular price typically. - Occasional deep-discount sales price. - Trend away from; role of manufacturers.

  3. Approaches to Product Pricing • Cost-oriented method: - Also called markup pricing. - Add a fixed % markup over cost. - Used by retailers: % over COGs. - Is quick and simple. • Demand-oriented method: - Based on what customers expected or willing to pay. - Competition-oriented pricing. - Customary pricing (vending machines). - Loss-leader pricing.

  4. Profit-Oriented Methods:Used by producers • Target Profit Pricing: price to achieve a specific profit level. • Target Return-on-Sales Pricing: aim is to achieve profits that are specific percentage of sales volume. - Supermarkets return on sales of 1-4%. • Target Return-on-Investment Pricing: - Companies like GM set a ROI such as 20%.

  5. Adjustments to list (normal) price • Quantity discounts (multiple-unit pricing. • Seasonal discounts. • Coupons: discount when purchased. • Rebates: portion of price returned to buyer. • Special event pricing.

  6. New product pricing: consider • Demand – potential number of consumers and elasticity of demand. • Newness of product- stage in lifecycle. • Cost of production and marketing. • Competition and its pricing.

  7. Special Pricing Strategies • Price bundling or Bundle pricing. • Variable pricing (zone pricing): charge different price in different stores, markets, or zones. • Skimming pricing: set a very high initial price that only a few customers will pay. • Penetration pricing: set a low initial price to appeal to mass market.

  8. Special pricing (continued) • Prestige pricing: sets high price to attract status-conscious consumers. • Price lining: price items in a product line at a number of different price points. • Odd pricing: $2.99; $495,000. - Customers don’t think as $3.00 or half a million. - Widely used, although may not work. • Demand-backward pricing: adjust quality to achieve desired price point.

  9. Internet Pricing • Consumers use for price search or comparison shopping; even if don’t buy on internet. • Auction pricing: Ebay; some companies use Ebay to sell overstocked, returned; out-of-season goods. • Low-bid pricing: Priceline; not sure of what purchasing (ex. Number of stops on flight or actual hotel). • Internet/home-delivery grocery shopping: Simon Delivers – Coburn’s

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