1. Pricing Strategy

2. Understanding Consumer Value  How much would you be willing to spend for: –Your high school yearbook as a senior –Your ticket to the junior or senior prom  We each place different value (and willing to pay different price) for the same product  “The key to pricing is “understanding the value that buyers place on a product or service” (often done through market research)

3. Shirt Example  You made T-shirts for Girls Lax and cost you $4/shirt  You sell each shirt for $10/shirt?  The margin or profit: $6/shirt  Price markup is 150% (10-4)/4=150%  Would lowering the selling price to $7 sell more shirts and/or increase profits?

4. Pricing Factors  Supply and Demand –When was the last time you clearly overpaid for a product? Why? –Peak and off-peak rates  Costs –To ensure a profit  Competition –Evaluate Verizon vs. Comcast  Combination of the three above

5. Market Share  Market Share is the percentage of the total sales volume generated by all competitors in a given market.  Brand Sneaker Preference for class –Nike, Reebok, Others? –Nike has ?% market share (market is the class)

6. Tickets  Brockton Rox tickets are $6. They don’t offer discount tickets. Why?

7. Substitutes – Brand Loyalty  There are lots of products with available substitutes (cereals, detergents, etc.)  Name a product where you would NOT accept a substitute?

8. Psychological Pricing  Odd/even pricing: suggests bargains  Prestige pricing: suggests exclusiveness  Multi-unit pricing: suggests a bargain by pricing items in multiples (1 for $.33 or 3 for $.99)  Bundle pricing: All inclusive trip, Verizon  Promotional pricing: holidays, rebates  Discount pricing: based on quantity, seasonal items, terms (cash or paying by certain date)

9. Luxury vs. Necessity  Gym membership  Cell phone  Cold medicine when you’re sick  Gas for your car

10. Urgency of Purchase  When was the last time you bought something because of a time restriction?  HHS tickets going on sale – more at door?  Gas when your car was on empty  Infomercial with time winding down

11. Price wars  Airline tickets, gasoline, computers  How much does price factoring in the three products named above?  Is anyone loyal to an airline based on frequent flyer miles (price & promotional tie in)?