1. PRICING STRATEGIES
CHAPTER TWELVE

2. Warm Up
You are at the grocery store comparing sunburn cream. Does the price of the sunburn cream have any impact on your purchase? Does the more expensive cream perceive a higher quality? …

3. Psychological impact of pricing…
Chances are that you have made a purchase in the past that was based on price. Can you recall a time you purchased something that was more expensive with hopes for superior quality?

4. Price Gouging
The practice of raising prices on goods or services to an unreasonable or unfair level. Usually occurs when supply is short after a crisis event. It is illegal in most jurisdictions.

5. Price Fixing
Occurs when competitors agree to maintain prices at a certain level.

6. Unit Pricing
Indicating cost based on a standard unit of measurement such as pound, ounce or piece.

7. Price Skimming
A pricing strategy where a company sets a very high initial price and then lowers it over time. It is often coupled with heavy promotions. Apple is notorious for price skimming. Do you agree?

8. Penetration Pricing
A pricing strategy where a company sets a very low initial price in order to attract customers and raise awareness.

9. Penetration Pricing NETFLIX
While it is now a market leader, Netflix is a great example of a business which successfully used penetration pricing to its advantage when it first launched back in 1997.

10. Penetration Pricing NETFLIX
Started as a mail-order, online and streaming movie rental business, Netflix used low price points initially to attract customers away from Blockbuster; its largest competitor at the time.

11. NETFLIX’S PRICING PLAN

12. Penetration Pricing NETFLIX
Its original package offered tiered price points and enabled customers to rent three DVDs simultaneously for $14.99; amounting to just over $1 per DVD per month for customers that took up the offer each week. This low pricing, combined with its streaming and online offering, enabled Netflix to pull in subscribers and gain a competitive advantage. Years later, in 2013, we would see Blockbuster go out of business.

13. Psychology Pricing
A marketing strategy based on the theory that prices will impact consumer perceptions.

14. Odd/Even Pricing
A pricing strategy where retail prices are set as odd prices, a little less than an even price.

15. Prestige Pricing
A pricing strategy where prices are set high to give the perception of high quality.

17. Promotional Pricing
The act of lowering the prices temporarily to raise awareness.

18. Discount Pricing Discount Pricing Gone Bad!
A pricing strategy where products are artificially marked up higher but are then offered for sale for what seems to be a lower cost to the consumer.
Discount Pricing Gone Bad!

19. MSRP
(Manufacturer Suggested Retail Price) A recommended price that retailers should charge set by manufacturers.

20. Markup
The amount added to the cost of manufactured good.

21. Markdown
A reduction to a price of a good.

22. Break Even Point
The point at which revenue equals cost.