Pricing

iPad Mini $329+ Kindle Fire Nexus 7 Both $199

What is Price? What is given up for the product The only P that directly generates revenue Price can be an indicator – Value – Quality

Things to consider… Competition Costs Company objectives Customers Channel members

Company PRICE objectives Profit Oriented – Profit Maximization – Satisfactory Profits – Target ROI Sales Oriented – Market Share – Sales Maximization

Company PRICE Objectives Competitor Oriented – Parity – Status quo Customer Oriented – Value for a specific TM

How Customers influence price Demand

Supply

Price Equilibrium

However….. Supply and demand analysis – Don’t account for marketing – Or branding – Or differing curves Luxury goods, where higher price leads to higher demand

Still on Customers influence Elasticity of demand – Elastic – Inelastic What influences elasticity – Income/Purchasing power – Substitutes – Durability – Other uses – Cross-price elasticity Complimentary products

Costs Variable Fixed Total

Break Even Analysis The point at which your profit is neither negative or positive FC/CPU

Competition Monopoly  ONE firm – Cable, FPL Oligopoly  Handful of firms – Airlines Monopolistic Competition  many firms, differentiated products, different prices – Most common Pure Competition  many firms, commodities, same prices – Wheat

Other influences on Price Internet – Shopping bots – Auctions Stage in PLC Distribution Strategy – match of YOURS with the CHANNEL

Pricing Strategy Price Skimming Penetration Pricing Status Quo

Price Skimming

Penetration Pricing

Unfair Practices Price Fixing/Collusion Discrimination (only for products) Predatory Pricing – Charge low to kill competition

Other common Tactics Odd/Even pricing – $99.95 Price Bundling Two Part pricing – Air Ticket, baggage fee, meal and seat