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Mastering Dynamic Pricing Strategies: A Comprehensive Guide for Effective Revenue Optimization

Learn about cost-oriented, demand-oriented, and competition-oriented pricing strategies through practical examples and considerations. Explore the impact of pricing policies such as one-price and flexible-price policies, psychological pricing techniques like odd-even and prestige pricing, and promotional strategies like bundle pricing and discount pricing. Discover how to implement new product introduction tactics, including skimming and penetration pricing, to maximize market share and profitability. Enhance your pricing knowledge with insights on everyday low prices, price lining, and multiple-unit pricing approaches.

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Mastering Dynamic Pricing Strategies: A Comprehensive Guide for Effective Revenue Optimization

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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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