1. PRICING POLICIES BMI 3C Marketing Worksheet Answers

2. Leader Pricing  When stores offer a popular product at a lower price to attract customers  The purpose is to generate traffic in the store  Sometimes referred to as “door crasher sales”

3. Price Lining  When all the products in a certain area of the store or of a particular line are priced the same  Customers find it convenient because know what the price is without difficulty  FOR EXAMPLE : sales racks, dollar stores

4. Everyday Low Price  Prices are kept low to make consumers feel they are getting the most value for their money  Often overwhelm customers with weekly flyers, sales, coupons, newspaper ads  Price guarantees are also part of the strategy to ensure the customers keep the idea that they get their greatest value at this location

5. Super Sizing  Consumers are offered a larger portion for a slightly higher price  The cost of the increase for the retail is low but the impression of added value will boost sales

6. Negotiated Price  Prices are negotiated (or haggled) between buyer and seller until a price is agreed upon  Retailers may be inclined to negotiate to keep the sale rather than lose it — especially if the customer agent works on commission (that is, earns his salary based on the sales he makes)

7. Interest-Free Pricing  Consumers get the product first but pay for it over time — usually with an added cost called interest  Reducing or eliminating the interest charge keeps the product attractive at its first price and boosts sales as a result

8. Combo Pricing  Consumers are offered more product but at a bigger discount  In order to get the discount, though, they have to buy the entire combination of products  Retailers make a bigger profit because they’re dividing the discount amongst the products  Sales are boosted with little expense because the consumer has already come for one product  Also called “bundling”

9. Psychological Pricing  Emotions are appealed to instead of logic  99 ¢ instead of $ 1.00 is perceived to be a much lower price despite it being just a penny

10. Return On Investment  Some businesses will invest the profits they make from sales back into the business in order to boost profits before the costs are applied  FOR EXAMPLE: the producer wants payment in 60 days, but the company sells out in 40; more merchandise is paid for with the profit in that 40 to have a much bigger profit left when the first bill is paid at the end of 60 days

11. Purchase Discounts  Prices are reduced on goods or services for increased volume  Producers/distributors often offer reductions if the payment of a bill (or invoice) is made early  FOR EXAMPLE: 2/10 net 30 means “2% off if paid in the first 10 days, full amount is due by 30 days”  Early payments reduce profit but get it much faster so that it can be reinvested faster

12. Benchmark Pricing  The leader with the most market share and/or who has been around the longest sets the price that the competition aims towards  FOR EXAMPLE: banking & credit card fees

13. Competitive Pricing  Products always follow the price of the competitor  If price is no longer a factor, then promotions, distribution, unique selling points and advertisement are needed to attract customers