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Pricing Strategies

Pricing Strategies. What is the best price for my product?. Pricing Questions. What is the perceived value of the good or service by the customer? Are there any similar products on the market? What price is the competition asking?. Pricing Strategies. Cost plus Follow the Competition

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Pricing Strategies

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  1. Pricing Strategies What is the best price for my product?

  2. Pricing Questions • What is the perceived value of the good or service by the customer? • Are there any similar products on the market? • What price is the competition asking?

  3. Pricing Strategies • Cost plus • Follow the Competition • Penetration • Skimming • Psychological • Loss-leader

  4. Cost-Plus Pricing • Selling Price = Unit Cost + Markup • Markup % = Selling Price – Unit Cost X 100 Unit Cost • Margin = Selling Price – Unit Cost • The adding of a Markup to the cost ensures a profit

  5. Follow-the-Competition • Price equal to or just below the competition • Watch costs relative to price to ensure profit.

  6. Penetration Pricing • New product or service priced significantly below competition • To win market share • If sales volume is large, profit can be high.

  7. Skimming • When no or limited competition • High price set • Watch for competitors moving in!!

  8. Psychological Pricing • Prices appear less than they really are • Eg. $299.98 vs. $300.00 • $9.99 vs. $10.00 • Now $4.96 vs. $4.99

  9. Loss-Leader Pricing • Selected products or services sold at cost or less • To attract customers who will make other purchases too • This hopefully will more than compensate for the losses on “leader” • “Door Crasher” Sales

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