ADVANCED MARKETING PRICING PRODUCTS AND SERVICES

WHAT IS PRICE? The value in money (or it’s equivalent) for the exchange of a good or service.

PSYCHOLOGICAL IMPACT OF PRICING Psychological impact of pricing is the customer’s emotional response to the price Customers’ perception shapes how a marketer determines price of product or service

STRATEGIES FOR PSYCHOLOGICAL PRICING Prestige Pricing Odd-Even Pricing Multiple Unit Pricing Buy One Get One (BOGO) Every Day Low Price (EDLP)

CLASS ACTIVITY Work individually or with a partner. Select one of the psychological pricing strategies identified in previous slide. Research the pricing strategy and identify the following: 1)Explanation of the strategy 2)Examples of businesses that use that strategy 3)How the strategy works to motivate the customer to buy and why is it a successful strategy 4)Create a PPT slide that summarizes the information on ONE SLIDE 5)Students will come back together as a large group and discuss their findings 50 Point assignment

PRESTIGE PRICING

ODD-EVEN PRICING

MULTIPLE UNIT PRICING

BUY ONE GET ONE FREE

EVERY DAY LOW PRICING

CLASS PROJECT Work with a partner and identify a product or group of products and apply psychological pricing to that product. Create the promotional piece to inform customers of the new pricing Prepare a PPT to present the pricing to the class. 50 Point assignment

IMPACT OF PRICE ON PROFITABILITY Profit Margin Cost of Goods Markup Markdown Gross Profit Net Profit

FACTORS IMPACTING PROFITABILITY Base Price- initial price of something; does not include taxes, shipping and handling, or other fees Cost – value to produce; value to obtain Competition- struggle between businesses for customers Demand- consumer willingness and ability to purchase something

COST ORIENTED PRICING Costs of acquiring or making product PLUS Expenses of doing business PLUS Projected profit margin Methods: Markup and Cost-Plus

MARKUP PRICING Resellers add a dollar amount (markup) to cost to arrive at price Example: Item cost $10 and % of markup on cost is 40% ; retail price would be $14: ($10 x.40) = $4.00; $10 +$4 = $14

COST-PLUS PRICING All costs and expenses are calculated and then desired profit is added to arrive at price. Used primarily by manufacturers and service companies More sophisticated than markup pricing because all fixed and variable expenses are calculated separately When manufacturer is running at full capacity, fixed expenses allocated to each product becomes smaller.

DEMAND ORIENTED PRICING Determine what customers are willing to pay Consumers’ perceived value is key to this method Relies on basic premise of supply and demand

COMPETITION-ORIENTED PRICING One of three actions after learning competitor price: 1)Price Above Competition 2)Price Below Competition 3)Price In-Line with Competition Competitive bid pricing is a type of competition- oriented pricing

ESTABLISHING BASE PRICE All three pricing methods may be used Class Activity: Determine the price for the following items in The Falcons’ Nest. You must use each method and explain why you selected that method: Ear Buds - Cost to Falcons Nest is $3.95 Phone Charger- Cost to Falcons Nest is $9.95 Orange/Navy Falcons’ Socks- $11.97