1. The various pricing techniques & The steps in setting prices
How much?
The various pricing techniques & The steps in setting prices .

2. Let's assume Nike sells $35 million a year in socks
Let's assume Nike sells $35 million a year in socks. If the total amount of socks sold from all companies within the market totals $110 million, then Nike has a market share equal to
31.8%
31.7%
31.9%
35%
Hint:
Your Sales
Total Sales

3. Pepsi has a taste test to gather opinions on a new drink they are offering, is an example of what function?
channel management
marketing information management
product/service management
surveying

4. John’s Deli is 10% higher than other restaurants but located only a block from UofL campus, John, maximizes the Deli’s profit every month. What competition is John’s Deli engaging in?
location
price
nonprice
service

5. Rooms at the Holiday Inn go for $155 a night
Rooms at the Holiday Inn go for $155 a night. At least 55 rooms a night must be filled to cover costs. For a marathon that rates are dropped by 10% as a special. How much does the hotel need to cover costs? _____________ How many rooms must it fill for the marathon night to break even?

6. A small manufacturer of cell phone accessories invest $220,000 in materials and labor to make 25,000 phone cases. The cost to make to package, advertise, sell, and ship the cell phone cases amounts $85,000. What is the cell phone case manufacturer’s return on investment if only 30,000 cases sell this year at $32.99?

7. Vocab
psychological pricing
odd-even pricing
prestige pricing
multiple-unit pricing
bundle pricing
promotional pricing
everyday low prices (EDLP)
price lining
discount pricing
trade discounts
seasonal discounts

8. Pricing Techniques
Two common pricing techniques marketers use are:
psychological pricing
discount pricing vs

9. Psychological Pricing
Psychological pricing refers to techniques that create an illusion for customers or that make shopping easier for them. Common psychological pricing techniques are:
odd-even pricing
prestige pricing
multiple-unit pricing
bundle pricing
promotional pricing
everyday low prices (EDLP)
price lining

10. Psychological Pricing
Odd-even pricing involves setting prices that end in either odd or even numbers. Odd numbers convey a bargain image; even numbers convey quality.
Prestige pricing involves setting higher-than-average prices to suggest status and prestige.

11. Psychological Pricing
Multiple-unit pricing involves pricing items in multiples to suggest a bargain and increase sales volume.
Bundle pricing involves including several complementary products in a package and pricing them lower as a group than if they were bought separately.

12. Psychological Pricing
Promotional pricing is generally used in conjunction with sales promotions when prices are lower than average.
Loss-leader pricing provides items at cost to attract customers.
In special-event pricing, prices are reduced for a short period of time, such as a holiday sale.

13. Psychological Pricing
Everyday low prices (EDLP) are low prices that are set on a consistent basis with no intention of raising them or offering discounts in the future.
Price lining involves offering all merchandise in a given category at certain prices, such as $25, $35, and $50.

14. Setting Prices Discount Pricing
Discount pricing involves the seller's offering reductions from the usual price. They include:
cash
quantity
trade
seasonal discounts
promotional discounts and allowances

15. Discount Pricing
Cash discounts are offered to buyers to encourage them to pay their bills quickly.
Quantity discounts are offered to buyers for placing large orders.
Noncumulative quantity discounts are offered on one order.
Cumulative quantity discounts are offered on all orders over a specified period of time.

16. Discount Pricing
Seasonal discounts are offered to buyers willing to buy at a time outside the customary buying season.
Promotional discounts are offered to wholesalers and retailers willing to advertise or promote a manufacturer's products.
Allowances are granted to customers for selling back an old model.

17. Steps in Setting Prices
These are the six steps in determining a price for an item:
1. Determine pricing objectives.
2. Study costs.
3. Estimate demand.
4. Study competition.
5. Decide on a pricing strategy.
6. Set price.

18. Types of Psychological Pricing
Odd-
Even
Pricing
Prestige Pricing
Price
Lining
Psychological
Pricing
Everyday
Low Prices
(EDLP)
Multiple-
Unit
Pricing
Bundle
Pricing
Promotional
Pricing

19. Product Life Cycle Sales Growth Stage Maturity Stage Decline Stage
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline
Stage
Sales
Profits
Dollars
Time

20. Full-Scale Launch of New Products
Introductory Stage
Full-Scale Launch of New Products
High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and production costs
Negative profits
Promotion focuses on awareness and information
Intensive personal selling to channels
Notes:
During the introductory stage, sales normally increase slowly. Marketing costs are high due to higher dealer margins required to obtain adequate distribution and the cost of consumer incentives to try a product.
Production costs are high.
Promotion strategy focuses on developing product awareness and informing consumers about the product’s potential benefits. Intensive personal selling is often required.
Promotion of convenience products may require heavy consumer sampling and couponing. Shopping and specialty products demand educational advertising and personal selling to the final consumer.

21. Growth Stage Increasing rate of sales Entrance of competitors
Offered in more
sizes, flavors, options
Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Promotion emphasizes brand ads
Goal is wider distribution
Prices normally fall
Development costs are recovered
Notes:
In the growth stage, sales grow at an increasing rate, many competitors enter the market, and larger companies may acquire small pioneering firms.
Profits rise rapidly, peak, and begin declining as competition increases.
Aggressive brand advertising and communication of the differences between brands is the preferred promotion strategy.
Adequate distribution is a major key to establish a strong market position and product success.

22. Many consumer products are in
Maturity Stage
Many consumer products are in
Maturity Stage
Declining sales growth
Saturated markets
Extending product line
Stylistic product changes
Heavy promotions to dealers and consumers
Marginal competitors drop out
Prices and profits fall
Niche marketers emerge
On Line: McDonald’s
What is McDonald’s doing to successfully compete in the maturity stage?
Notes:
The maturity stage begins when sales increase at a decreasing rate, and the market approaches saturation. This is normally the longest stage of the PLC.
Annual models may appear during the maturity stage for shopping and specialty products. Product lines are lengthened to appeal to additional market segments.
Service and repair help manufacturers distinguish their products from others.
Heavy promotion is required to maintain market share. For example, consider the competitive “wars” between Coke and Pepsi, Budweiser and Miller, and McDonalds against Burger King and Wendy’s.
As prices and profits continue to fall, marginal competitors drop out of the market.
Niche marketers that target narrow, well-defined segments of a market emerge.

23. Rate of decline depends on adoption of substitute products
Decline Stage
Long-run drop in sales
Large inventories of unsold items
Elimination of all nonessential marketing expenses
Notes:
The rate of decline depends on how rapidly consumer tastes change or substitute products are adopted.
A strategy for declining products includes elimination of nonessential marketing expenses, and the eventual product withdrawal as sales decline.
Rate of decline depends on
change in tastes or
adoption of substitute products

24. How stages of the product life cycle relate to firm’s marketing objectives & marketing mix actions
INTRODUCTION
GROWTH
MATURITY
DECLINE
Product
Strategy
Limited models
Frequent
changes
More models
Frequent changes.
Large number of models.
Eliminate unprofitable models
Limited Wholesale/ retail distributors
Expanded dealers. Long-
term relations
Extensive.
Margins drop.
Shelf space
Phase out unprofitable outlets
Awareness.
Stimulate
demand.Sampling
Aggressive ads.
Stimulate demand
Advertise. Promote
heavily
Phase out promotion
Higher/recoup development costs
Fall as result of
competition & efficient produc-
tion.
Prices fall (usually).
Prices
stabilize at low level.
Distribution
Strategy
Promotion
Strategy
Pricing
Strategy