Pricing Strategies Chapter 26
Cost-Oriented Pricing Markup Pricing – difference between cost and price Cost-Plus Pricing – costs and expenses, plus desired profit
Demand-Oriented Pricing Consumer’s perceived value Number of substitutes available Brand loyalty Minor differences – tickets, fridge colors
Competition-Oriented Pricing Price Above Price Below Price In Line with Competition Ignore Cost and Demand Competitive-Bid Pricing
Combining Pricing Considerations Cost-Oriented determines the price floor Demand-Oriented determines range Competition-Oriented determines relative position Product to product considerations
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
New Product Introduction Skimming Pricing – high price when demand is greater than supply Penetration Pricing – lower price to gain market share
Psychological Pricing Techniques that create an illusion for customers or that make shopping easier for them
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)
Prestige Pricing Higher-than-average prices suggest status and prestige Many assume higher price equals higher quality
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
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
Promotional Pricing Loss leader Special event Rebates
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
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
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)