PRICING One of the 4 P’s

the value of money (or its equivalent) placed on a good or service What is it? the value of money (or its equivalent) placed on a good or service

understanding the value buyers place on a product key of pricing understanding the value buyers place on a product

importance of price helps establish and maintain a firm’s image, competitive edge and profits customers use price to make judgments sometimes it’s the focus of a firm’s advertising strategy helps determine profits

Goals of pricing Make a profit Gain market share   Make a profit Gain market share market share = % of total sales volume generated by all competitors in a given market market position = relative standing in relation to the competitors Achieve a certain return on investment (ROI) Determines the relative profitability of a product ROI = Profit Investment Meet the competition

Government regulations affecting prices 1. Sherman Anti-Trust Act of 1890 -outlawed monopolies (including price fixing) 2. Clayton Anti-Trust Act of 1914 -defined price discrimination: creates unfair competition price discrimination occurs when a firm charges different prices to similar customers in similar situations 3. Robinson Patman Act of 1936 -strengthened the provisions of the Clayton Act intended to help smaller retailers compete with large chain stores -

Characteristics of effective pricing Realistic Flexible Competitive

psychological pricing a set of pricing techniques used to create an image of a product and to entice customers to buy

1. Odd pricing Prices ending in an odd Number ($9.99 & 19.95) convey image of a bargain

2. Even pricing Prices ending in a “0” or even number ($12.00 & $34.84) Convey image of quality  

3. Promotional pricing Prices are lowered for running sales dollars off, % reductions, rebates, coupons, buy one get one free Short-term technique

4. Prestige pricing Prices set high to convey an image of status & high quality Examples: Coach purses, Jaguar cars, Bose speakers

5. Price Lining Prices are set at different levels to indicate different quality levels for the same type of product Gives customers options & allows them to choose features & value they want in a product Examples: Refrigerators: $300, $550, $2,500