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What’s Happening?

What’s Happening?. http ://www.youtube.com/watch?feature=player_embedded&v=9mIBKifOOQQ. Pricing Strategies. Chapter 11. Price Defined. The amount of money charged for a product or service that consumers exchange for the benefits of having or using the product or service.

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What’s Happening?

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  1. What’s Happening? http://www.youtube.com/watch?feature=player_embedded&v=9mIBKifOOQQ

  2. Pricing Strategies Chapter 11

  3. Price Defined • The amount of money charged for a product or service that consumers exchange for the benefits of having or using the product or service. • Most flexible element in marketing mix • Major impact on store/product/service image

  4. Value Product powerto stimulateexchange Barter Money-less exchange Other Terms: Rent Fee Donation Toll Honorarium Tuition What else is price?

  5. Price as a Marketing Mix variable Price Competition versus Nonprice CompetitionJohn Deere uses nonprice competition by emphasizing quality and workmanship

  6. ₤ d $ TM s П The Fundamentals of Pricing Strategy • Set pricing objectives • Establish importance to target market • Understand demand • Understand costs • Determine strategy

  7. Company objectives Marketing objectives Pricing strategies and policies Product objectives Distribution objectives Promotion objectives Price objectives Actual prices Relating Pricing objectives to Marketing objectives

  8. Inelastic demand: when a percentage change in price causes a much smaller percentage change in demand Products that have few, if any substitutes Consumption is necessary Pricing strategy is to raise prices to earn more profits Price Elasticity of Demand • Price elasticity: a measure of the sensitivity of demand to changes in price • Elastic demand:when a percentage change in price causes a much larger percentage change in demand • Products that have many substitutes • Consumption is discretionary • Pricing strategy normally to lower price to sell more

  9. Price Elasticity of Demand

  10. Price Adjustments • Cash Discounts • Trade Discounts • Quantity Discounts • Seasonal Discounts • Chain Discounts • Promotional Allowances Seasonal discounts are a common marketing strategy to encourage purchases

  11. Differential Pricing strategies Variable pricing Segment pricing Skimming Periodic discounting Random discounting Competitive Pricing strategies Meeting the competition Below the competition Price leadership Following the leader Penetration pricing Pricing Strategies

  12. Product-line Pricing strategies Captive pricing Leader pricing Bait pricing Price lining Price bundling Multiple-unit pricing Psychological and image Pricing strategies Reference pricing Odd and even pricing Prestige pricing Pricing Strategies

  13. Marketing Math

  14. Amount added on ---------------------------- Selling price Amount added on ---------------------------- Cost = % markup on cost = % markup on selling price Establishing the Exact price 1.Markup on Selling Price: 2. Markup on Cost:

  15. Manufacturer Cost $20.00 20% markup $ 5.00 Selling price $25.00 Wholesaler Cost $25.00 15% markup $ 4.41 Selling price $29.41 Retailer Cost $29.41 41% markup $20.59 Selling price $50.00 Markup through a channel of distribution

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