1. 1 Pricing Strategies BBI2 – Introduction to Business Adapted from an original PPT by Sameer Mathur, Ph.D.Assistant Professor (Marketing), McGill University

2. Price Money Charged for a Product or Service Generates RevenueEasy to Change

3. Many Names

4. LowHigh Low High Economy Pricing Market Penetration Market Skimming Premium Pricing Price Quality Pricing Strategies

5. Market Skimming Applies to new, distinctive products, early in the Product Life Cycle

6. Market Skimming Most consumer electronic products The iPod was priced $259 in 2004.

7. Captive Product Pricing

8. Two Pricing Mistakes Reducing Price Too Soon Pricing Based on Cost instead of Customer Value

9. Economy Pricing

10. Premium Pricing

11. Price Adjustment Strategies Discount / allowance Segmented Psychological Promotional Types of discounts –Cash discount –Quantity discount –Seasonal discount Allowances –Trade-in allowances –Promotional allowances Strategies

12. Quantity Discounts in Public Transport 12

13. Two-part Tariffs Total Price = Retail Price + Shipping Price Total Price = Retail Price + Shipping Price

14. Seasonal Discounts

15. Trade In

16. (Pure) Bundling

17. (Mixed) Bundling

18. Price Adjustment Strategies Discount / allowance Segmented Psychological Promotional Types of segmented pricing strategies: –Product-line pricing –Location pricing –Time pricing Also called revenue or yield management Certain conditions must exist for segmented pricing to be effective Strategies

19. Pricing a Product-Line

20. 20 Product Lines in India High Quality Low Quality Toyota Corolla Altis Toyota Camry W1

21. Time Pricing

22. 22 Student Discounts in Public Transport

24. Segmented Pricing Effectiveness –Market must be segmentable –Segments must show different demand –Pricing must be legal –Costs of segmentation cannot exceed revenues earned –Segmented pricing must reflect real differences in customers perceived value

25. Price Adjustment Strategies Discount / allowance Segmented Psychological Promotional International 25 The price is used to say something about the product. –Price-quality relationship –Reference prices –Differences as small as five cents can be important –Numeric digits may have symbolic and visual qualities that psychologically influence the buyer Strategies

26. Psychological Pricing

27. This ad for a luxury priced car attempts to show that Mercedes owners form important relationships with their cars

28. Price Adjustment Strategies Discount / allowance Segmented Psychological Promotional Temporarily pricing products below the list price or even below cost –Contracts, Special-event pricing –Cash rebates –Low-interest financing, warranties –Loss leaders Strategies

29. 29 Promotional Cellphone Pricing PROMOTIONALPRICING

30. 30 No Promotional Pricing

31. 31

32. 32

33. Loss Leader Sold at (or below) cost ~Frequently purchased product ~Inconveniently Located~Perishable

34. No Loss Leader => Every Day Low Pricing 34

35. Promotional Pricing - Challenges –Easily copied by competitors –Creates deal-prone consumers –Erode brand value –Industry Price Wars