1. Chapter 30 – Pricing Strategies

2. Three Pricing Strategies
Cost Oriented Pricing
Markup Pricing
Cost Plus Pricing
Demand Oriented Pricing
Competition Oriented Pricing
Competitive Bid
Going-Rate Pricing
Business tend to use all three in making a decision!

3. One Price vs. Flexible Pricing
One Price Policy – when all customers are charged the same price for the goods and services offered for sale.
Price Tags
Flexible – Price Policy – permits customers to bargain for merchandise.
Rarely used for legal reasons.
Used for Cars, antiques, furniture etc…

4. Product Life Cycle Maturity Growth Decline Introduction Introduction

5. PLC - Introduction
When a product is first being introduced, one of two strategies may be used….
Skimming Pricing
Sets the price very high to create demand.
Usually when there are few competitors
Penetration Pricing
Initial Price is very low to attract many customers.
Used when there is lots of competition and
when substitutes are available.

6. PLC - Growth Stages
Growth Stage – is the period when sales are highest and the product is gaining popularity.
If Skimming Pricing was used in the Introduction Stage, then the price needs to be monitored and lowered when the sales begin to drop.
If Penetration Pricing was used, then very little will be done regarding the price.

7. PLC – Maturity Stage
Marketers main goal during the Maturity Stage is to stretch the life of a product. Sales at this stage have started to level off.
Revitalize the Product
Find new Markets

8. PLC – Decline Stage
During this stage, sales decrease and profit margins are reduced.
During this stage, marketers try to reduce the costs of manufacturing, advertising etc…
Once the product is no longer profitable, the product is phased out.

9. Pricing Techniques Psychological Pricing
Odd Even Pricing – vs $200. Odd numbers convey a bargain, even numbers convey quality.
Prestige Pricing – setting prices higher than average to convey status or prestige.
Multiple Pricing – 3 for $.99 is more effective than selling items at $.33 each.
Promotional Pricing – usually used in conjunction with sales promotional when prices are lower than average.

10. Discount Pricing
Cash Discounts – discounts are offered to buyers if they pay their bill on time. For example 2/10 net % discount if paid in 10 days.
Quantity Discounts – when placing a large order quantities are given.
Seasonal Discounts – are offered to buyers who are willing to buy in advance of the customary buying season.
Promotional Discounts and Allowances – offered to wholesalers and retailers who are willing to advertise or promote a manufacturer’s products.