1. Price in Businesses
By: Nicolas Torrico, Lucero Contreras, Jorge Garcia, and Francis Canelas

2. Price Price is the only P that actually gives revenue to the business
This refers to the money customers use to have a good or a service
Having the appropriate Price can lead to meet the enterprises´ marketing objectives
The appropriate Price has to be set fo all new and already existing products

3. Price is Divided into 8 categories
Cost-Plus
Penetration
Skimming
Psycological
Loss Leader
Price Discrimination
Price Leadership
Predatory
        

4. COST - PLUS PRICING
USUALLY RETAILERS  USE THIS METHOD BY ADDING A PERCENTAGE OF THE PRICE THAT THE PRODUCER HAS OVER THE PRODUCT TO MAXIMIZE THE PROFIT WHEN THE PRODUCT IS SOLD.
DEFINITION: ADDING A FIXED MARKUP FOR PROFIT TO THE UNIT PRICE OF A PRODUCT.

5. Penetration Pricing Advantages
Used when:
Intoduce a NEW product in an EXISTING market
Use an EXISTING product to enter a NEW market
Low prices = people are encouraged to buy your products= high sales volume & high market share
High sales volume = decreases in costs of production & increases in stock turnover
It is:
Setting a low initial price to attract customers fast to get a high market share
AS YOUR MARKET SHARE INCREASES SO DOES THE PRICE
Disadvantages
High sales volume does not always mean high profits
If the price is kept too low then customers could believe the product has low quality
This strategy is only for price sensitive markets and price increases you could loose customers

6. Skimming It’s a nasty strategy
At first the firm sets very high prices in a new product; through time the firm lowers the prices.

7. Psycological Pricing How pricing affects consumers´perception
High-Price = High Quality
Reduce Prices slightly
Advantages:
May lead to obtain larger Çrevenues
Consumer perceptions = Strategy in many market segments
Disadvantages
Businesses that require whole numbers find it inconvenient

8. Loss Leader Aggresive strategy
A product is sell cheaper to attract consumers
Important strategy if losses are made in a product
Mostly used by retailers
There will not be a profit; but neither a loss
Last resource (don’t use this strategy for best selled products)

9. Price Discrimination
When a retailer has the same product with different prices for different markets
Cost depend on what the market is willing to pay
It is classified into 3 categories
First degree: when the business is a monopoly and has total control over price
Second degree: price depends on quantity demand (higher quantity lower price; often seen in suppliers)
Third degree: charging different prices for different consumer groups

10. L
PRICE LEADERSHIP
Usually exists when a company has the highest market share
It could be that these companies benefit from economies of scale and therefore have the lowest unit costs
They set the market price
Ex: setting really low prices
(not always the case)
This company initiates price changes and all the other firms in this market just follow

11. PREDATORY PRICING
DEFINITION: DELIBERATELY UNDERCUTTING COMPETITORS’ PRICES IN ORDER TO TRY TO FORCE THEM OUT OF THE MARKET.
IT IS AN ILLEGAL STRATEGY IN COUNTRIES THAT FORM PART OF THE EUROPEAN UNION,
IT IS BECAUSE WITH THIS METHOD, THE ESTABLISHED COMPANIES ARE ABLE TO ELIMINATE SMALL COMPETITORS THAT ARE NOT ABLE TO HANDLE A PRICE WAR,

12. SHORT TERM PRICE WARS MAY HAVE SOME ADVANTAGES:
CUSTOMERS DON’T EXPECT PRODUCTS TO REDUCE THEIR PRICES SO WHEN IT ACTUALLY HAPPENS THEY ARE ENCOURAGED TO BUY MORE.
LONG TERM PRICE WARS ARE NOT BENEFICIAL:
MANY OF THE COMPANIES IN THE MARKET ARE NOT ABLE TO HANDLE A PRICE WAR LONG PERIODS OF TIME, THEREFORE THE COMPANY THAT “WINS” THE PREDATORY PRICE WAR WILL FORCE THE COMPETITION TO LEAVE THE MARKET AND SO A MONOPOLY WILL BE CREATED. AFTER THAT THE COMPANY MAY SET HIGHER PRICES BUT THE CONSUMERS WON'T HAVE OTHER OPTIONS TO CHOSE FROM.

13. ACTIVITY (15 MINUTE HOMEWORK)
DON'T FORGET THAT
THE PRICING STRATEGIES PRESENTED WERE:
COST-PLUS
PENETRATION
SKIMMING
PSYCHOLOGICAL
LOSS LEADER
PRICE DISCRIMINATION
PRICE LEADERSHIP
PREDATORY
FOR EACH OF THE PRICING STRATEGIES SHOWN BEFORE GIVE AT LEAST ONE EXAMPLE OF WHEN THAT STRATEGY WAS USED (NOT MENTIONED IN THE PRESENTATION). THEY COULD BE PRODUCT, SERVICES OR SPECIFIC COMPANY CASES.