1. Product Pricing ApEc 4451

2. General Retail Strategies  EDLP (everyday low pricing): - Aimed at pricing continuity. - Aimed at pricing continuity. - Strive for low price, but not always the - Strive for low price, but not always the lowest. lowest. - Low price guarantee policy. - Low price guarantee policy. - Trend toward. - Trend toward.  High/low pricing: - Maintain a regular price typically. - Maintain a regular price typically. - Occasional deep-discount sales price. - Occasional deep-discount sales price. - Trend away from; role of manufacturers. - Trend away from; role of manufacturers.

3. Approaches to Product Pricing  Cost-oriented method: - Also called markup pricing. - Also called markup pricing. - Add a fixed % markup over cost. - Add a fixed % markup over cost. - Used by retailers: % over COGs. - Used by retailers: % over COGs. - Is quick and simple. - Is quick and simple.  Demand-oriented method: - Based on what customers expected - Based on what customers expected or willing to pay. or willing to pay. - Competition-oriented pricing. - Competition-oriented pricing. - Customary pricing (vending machines). - Customary pricing (vending machines). - Loss-leader pricing. - Loss-leader pricing.

4. Profit-Oriented Methods: Used by producers  Target Profit Pricing: price to achieve a specific profit level.  Target Return-on-Sales Pricing: aim is to achieve profits that are specific percentage of sales volume. - Supermarkets return on sales of 1-4%. - Supermarkets return on sales of 1-4%.  Target Return-on-Investment Pricing: - Companies like GM set a ROI such as - Companies like GM set a ROI such as 20%. 20%.

5. Adjustments to list (normal) price  Quantity discounts (multiple-unit pricing.  Seasonal discounts.  Coupons: discount when purchased.  Rebates: portion of price returned to buyer.  Special event pricing.

6. New product pricing: consider  Demand – potential number of consumers and elasticity of demand.  Newness of product- stage in lifecycle.  Cost of production and marketing.  Competition and its pricing.

7. Special Pricing Strategies  Price bundling or Bundle pricing.  Variable pricing (zone pricing): charge different price in different stores, markets, or zones.  Skimming pricing: set a very high initial price that only a few customers will pay.  Penetration pricing: set a low initial price to appeal to mass market.

8. Special pricing (continued)  Prestige pricing: sets high price to attract status-conscious consumers.  Price lining: price items in a product line at a number of different price points.  Odd pricing: $2.99; $495,000. - Customers don’t think as $3.00 or half a million. - Customers don’t think as $3.00 or half a million. - Widely used, although may not work. - Widely used, although may not work.  Demand-backward pricing: adjust quality to achieve desired price point.

9. Internet Pricing  Consumers use for price search or comparison shopping; even if don’t buy on internet.  Auction pricing: Ebay; some companies use Ebay to sell overstocked, returned; out-of-season goods.  Low-bid pricing: Priceline; not sure of what purchasing (ex. Number of stops on flight or actual hotel).  Internet/home-delivery grocery shopping: Simon Delivers – Coburn’s Simon Delivers – Coburn’s