1. Pricing Strategies Part of theMarketing Mix (Product, Price, Place, Promotion)

2. Cost-Oriented PricingProducers calculate the COST of making a product, then add preferred profit Markup Pricing Cost-Plus Pricing • Commonly used by wholesalers & retailers • Expressed as a percentage • Ex: We want to make a 20% profit on this item • Item costs $10 to make • We charge $12 to buy it • 10 * 1.2 = 12 • Ex: Product sells for $175 & costs us $75 • What is the markup? • 175 – 75 = 100 • 100/75 = 1.33 = 133% • Let’s check it backwards • Commonly used by manufacturers & service businesses • Expressed as a $ amount • Example • Job costs $200 to perform • Add $100 as profit • Charge $300 to the client • 200 + 100 = 300

3. Demand Oriented Pricing (Target Pricing)What are consumers willing to spend on a product or service? Price is set in relation to the perceived value of the product/service

4. Law of Demand • How many of you would pay $400 for iPhone 4S? • Raise your hand • How many of you would buyone for $50? • Raise your hand • The higher the price, the lowerthe demand • The lower the price, the higherthe demand

5. Psychological Pricing Based on the theory that certain prices have a psychological impact Retail prices expressed as "odd prices“ or a little less than a round number • Examples • $7.99 vs. $8.00 • $19.99 vs. $20.00 • $199 vs. $200

6. Competition-Oriented PricingThree Possible Actions

7. Pricing Policies & Product Life CycleIntroducing a new product

8. Non-Price Competition