PRICING TECHNIQUES

Psychological Pricing Techniques used in the consumer market that create an illusion or that make shopping easier for customers

A. Odd/Even Pricing Prices end in odd or even numbers Odd numbers convey bargain image ($19,999) Even numbers convey quality/high end ($35,000)

B. Prestige Pricing Prices purposely set high to create image of quality Targeted toward markets who equate high price with quality Examples – Perrier Water – Coach – Hummer

C. Multiple Pricing Targeted toward value-conscious markets Example: 3 for $.99 instead of $.33 each

D. Promotional Pricing Temporary price reduction Used with sales promotions Special Event pricing – Back-to-school – President’s Day Designed to increase store traffic Loss-leader pricing

E. Price Lining All merchandise in one category priced at the same price “All blouses -- $25, $35 or $50 Typical in Department Store setting Advantages Customers differentiate between value Helps customers make decisions Allows store to target multiple markets Allows salespersons to “up sell” or “down sell” more easily

Pricing Techniques used in B2B Marketing

Lesson Objectives Identify 4 types of discount pricing techniques Calculate cash discounts

Discount Pricing Reductions in price given based on a customer’s buying behavior. Targeted toward industrial sales

A. Cash Discounts To encourage quick payment of bill Example 2/10 net 30 Read: If paid by the 10 th, receive 2% discount, OR full amount due by the 30 th of the month

Example: 2/10 net 30 If the customer owes $2500 and pays on the 8 th of the month, how much would they owe? How much if they paid on the 12th?

B. Quantity Discounts To encourage large orders – Cumulative: over a period of time – Non-cumulative: one order/one time Generally – the more you buy, the more you save Similar to multiple pricing for personal consumers

C. Seasonal Discounts To encourage purchasing in advance of the customary buying period. Helps organize production and labor

D. Promotional Discounts Given for advertising or promoting manufacturer’s products % reduction in price Allowance - free merchandise Cooperative advertising – costs shared