Prepared by Anna Riana Putriya | | P RICING S TRATEGY Week 6

 Price is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service.  Price is the only element in the marketing mix that produces revenue; all other elements represent costs

Specifications:  Apple Juice  Vol. 1 L

Factors to consider when setting prices Customer Perception of Value

PRICE - QUALITY STRATEGIES Premium Value PRICE High Medium Low High Value Super Value Overcharging High Low PRODUCT QUALITY Med Medium Value Rip-Off Good-Value False Economy

Major consideration in setting pricing Product costs Product costs Consumer perception of value Consumer perception of value Competitors’ prices and other internal and external factors Price floor No profits below this price Price ceiling No demand above this price

Pricing approaches Pricing Approaches Cost-Based Pricing Cost-plus pricing / markup pricing Break-even analysis Target profit pricing Buyer-Based Pricing Value pricing Competition-Based Pricing Going-rate pricing Sealed-bid pricing Everyday low pricing (EDLP) High-low pricing Value-added pricing

“ What you charge is important, but so is how is you charge ” John T. Gourville, Ph.D. (HBS marketing professor)

Product Mix Pricing Strategy Product Bundle Pricing Pricing bundles of products sold together Optional Product Pricing By-Product Pricing Pricing low-value by- products to get rid of them Captive Product Pricing Pricing products that must be used with the main product Product Line Pricing Setting price steps between product line items Pricing optional or accessory products sold with the main product

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological Cash discount, Quantity discount, Functional (trade) discount, Seasonal discount Trade-in allowances, Promotional allowances

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological Customer-segment, Product-form pricing, Location pricing, Time pricing Also called revenue or yield management. Certain conditions must exist for segmented pricing to be effective

T IME P RICING P RICE D ISCRIMINATION

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological Price-quality relationship, Reference prices, Differences as small as five cents can be important, Numeric digits may have symbolic and visual qualities that psychologically influence the buyer

Most Attractive? Better Value? Psychological reason to price this way? A 32 Kg Rp B 26 Kg Rp

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological Loss leaders, Special-event pricing, Cash rebates, (Low- interest financing, longer warranties, free maintenance)

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological FOB-origin pricing, Uniform- delivered pricing, Zone pricing, Basing-point pricing, Freight- absorption pricing

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological Depends on: Economic conditions, Competitive situation, Laws / regulations Distribution system, Consumer perceptions, Corporate marketing objectives, Cost considerations

Price Adjustment Strategies Allowance / discountInternational Psychological SegmentedGeographical Promotional Psychological Cash discount, Quantity discount, Functional (trade) discount, Seasonal discount Price-quality relationship, Reference prices, Differences as small as five cents can be important, Numeric digits may have symbolic and visual qualities that psychologically influence the buyer Customer-segment, Product-form pricing, Location pricing, Time pricing FOB-origin pricing, Uniform- delivered pricing, Zone pricing, Basing-point pricing, Freight- absorption pricing Depends on: Economic conditions, Competitive situation, Laws / regulations Distribution system, Consumer perceptions, Corporate marketing objectives, Cost considerations Trade-in allowances, Promotional allowances Loss leaders, Special-event pricing, Cash rebates, (Low- interest financing, longer warranties, free maintenance)

Responding price changes

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