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Pricing Strategies

Pricing Strategies. Chapter 26. Cost-Oriented Pricing. Markup Pricing – difference between cost and price Cost-Plus Pricing – costs and expenses, plus desired profit. Cost-Oriented Examples. Demand-Oriented Pricing. Consumer’s perceived value Number of substitutes available Brand loyalty

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Pricing Strategies

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  1. Pricing Strategies Chapter 26

  2. Cost-Oriented Pricing • Markup Pricing – difference between cost and price • Cost-Plus Pricing – costs and expenses, plus desired profit

  3. Cost-Oriented Examples

  4. Demand-Oriented Pricing • Consumer’s perceived value • Number of substitutes available • Brand loyalty • Minor differences – tickets, fridge colors

  5. Demand-Oriented Examples

  6. Competition-Oriented Pricing • Price Above • Price Below • Price In Line with Competition • Ignore Cost and Demand • Competitive-Bid Pricing

  7. Competition-Oriented Examples

  8. Combining Pricing Considerations • Cost-Oriented determines the price floor • Demand-Oriented determines range • Competition-Oriented determines relative position • Product to product considerations

  9. Pricing Policies • One-Price Policy – all customers are charged the same price • Flexible-Price Policy – customers pay different prices for the same type or amount of merchandise • Bargaining takes place with cars, antiques, furniture, and jewelry • Internet sites – name your price

  10. One-Price versus Flexible-Price

  11. New Product Introduction • Skimming Pricing – high price when demand is greater than supply • Penetration Pricing – lower price to gain market share

  12. Skimming versus Penetration

  13. Psychological Pricing • Techniques that create an illusion for customers or that make shopping easier for them

  14. Odd-Even Pricing • Setting prices that all end in either odd or even numbers • Odd numbers convey a bargain ($9.99, $79, $845.67) • Even numbers convey a quality image ($100, $20, $50)

  15. Odd-Even Pricing

  16. Prestige Pricing • Higher-than-average prices suggest status and prestige • Many assume higher price equals higher quality

  17. Prestige Example

  18. Multiple-Unit Pricing • Suggests a bargain and helps to increase sales volume • 3 for $99 • The 1 for $2, 2 for $3, 3 for $5 dilemma

  19. Multiple-UnitExample

  20. Bundle Pricing • Several complementary products in a package sold at a single price • Help to sell items that may not have sold on their own

  21. Bundle Price Example

  22. Promotional Pricing • Loss leader • Special event • Rebates

  23. Everyday Low Prices • Low prices that are set on a consistent basis with no intention of raising them or offering discounts in the future • Sales stability • Wal-Mart is famous for this

  24. Everyday Low Prices Example

  25. Price Lining • All items in a certain category are set at the same price. $25, $35, and $50. • Make the price differences large enough to differentiate • Allows sales people to easily offer a more expensive (more profitable) alternative

  26. Price Lining Example

  27. Discount Pricing • Cash Discounts – incentives to pay the bill early (2/10, net 30) • Quantity Discounts – lower price for larger quantity • Trade Discounts – prices to wholesalers versus retailers • Seasonal Discounts – price change based on time of year (Christmas lights, mower)

  28. Discount Pricing

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