2. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Part Two.

3. General Pricing Approaches Demand-Oriented Pricing Approaches Cost-Oriented Pricing Approaches Profit-Oriented Pricing Approaches Competition-Oriented Pricing Approaches

4. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-3.

5. Skimming Price Beginning price is the highest possible. Often used for new products. http://www.apple.com/iphone/iphone-3gs/ Effective when:.. 1) Enough customers will buy the product at the high price to make these sales profitable 2 ) The high initial price will not attract competitors. 3) Lowering price has only a minor effect on increasing sales volume and reducing unit costs. 4) Customers interpret the high price as high quality.. These four conditions exist when patents or copyrights protect the product or the product has a uniqueness that customers understand and that they value..

6. Skimming Price http://www.apple.com/iphone/iphone-3gs/ PRICEPRICE Sales Volume $400 $350 $300 $250 $200 http://farm3.static.flickr.com/2218/2658111331_ea009217f2.jpg.

7. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-6

8. Penetration Pricing The opposite of price skimming. A product is sold at a very low price in order to immediately appeal to the mass market. http://www.shopping.hp.com/webapp/shopping/store... Predatory pricing is illegal..

9. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-8

10. Prestige Pricing Prestige pricing involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. Products prestige pricing may sell worse at lower prices than at higher ones because buyers tend to associate a lower price with lower quality. http://www.thechicecologist.com/wp-content/uploads/2008/12/diamond.jpg $30,000. $49.99...

11. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-10

12. Odd-Even Pricing Pricing at.99 instead of 1.00 $499.99 instead of $500. $29,999 instead of $30,000

13. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-12

14. Target Pricing Consumer Retailer Wholesaler Manufacturer Consumer will pay $120 Retailer will pay $60 Wholesaler will pay $36 Manufacturing cost is $32, not the needed $26.....

15. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-14

16. Bundled Pricing http://gooddesignagewell.com/2008/11/03/mcdonalds-happy-meal-of-the-future/

17. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-16

18. Yield Management Pricing http://www.aviationexplorer.com/ Airline%20Seating%20Charts/ Airbus_A320_Northwest_ Airlines_Seating_Chart.gif 28 1 2 3 4 5 6 7 89 10 11 12 13 14 $200....

19. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 $200 15 $275

20. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 $275 17 16 $350

21. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 $350 18 19 20 21 22

22. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 $350 18 19 20 21 22 $525

23. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 18 19 20 21 22 $525 232425 26 27

24. Yield Management Pricing http://www.aviationexplorer.com/ Airline%20Seating%20Charts/ Airbus_A320_Northwest_ Airlines_Seating_Chart.gif 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 18 19 20 21 22 $525 232425 26 27

25. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-24 End of Part Two. Go to Part Three.

26. End of Part Two. Go to Part Three.