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Pricing as Part of The Marketing Mix Chapters 25 and 26 Glenco: Marketing Essentials
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What Affects Pricing? Costs and Expenses Fixed Expenses Fixed Expenses Variable Expenses Variable Expenses Supply and Demand Elastic Demand Elastic Demand Inelastic Demand Inelastic Demand
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Factors Affecting Pricing con’t Competition Monopoly Monopoly Consumer Perception Example: Generic vs. Branded Products Example: Generic vs. Branded Products
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Base Pricing Concepts What is base pricing? Types of pricing concepts Cost oriented pricing Cost oriented pricing Markup-retail pricingMarkup-retail pricing Cost Plus Pricing-manufacturingCost Plus Pricing-manufacturing Demand oriented pricing Demand oriented pricing Competition Oriented Pricing Competition Oriented Pricing
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One Price vs. Flexible One Price Pricing All customers charged the same price All customers charged the same price Flexible Pricing Different customers pay different prices for same item Different customers pay different prices for same item
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Ways to Adjust Base Pricing Product Mix Strategies Price lining-groups of merchandise ($25.00, $35.00 etc ) Price lining-groups of merchandise ($25.00, $35.00 etc ) Optional Product-special order Optional Product-special order Captive Products- ex: printers and cartridges Captive Products- ex: printers and cartridges By Products-mulch By Products-mulch Bundle pricing-ex: computers Bundle pricing-ex: computers Geographical-location of customer Geographical-location of customer International International Exchange rates, tariffs, shipping rates, economic conditionsExchange rates, tariffs, shipping rates, economic conditions
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Base Pricing Adjustments Segmented Pricing Strategies Buyer identification-different segments pay different prices Buyer identification-different segments pay different prices Senior citizens, First Class travelers, StudentsSenior citizens, First Class travelers, Students Product Design-Different product styles w/ different prices (demand related) Product Design-Different product styles w/ different prices (demand related) North Face JacketsNorth Face Jackets Purchase Location-Where products are sold Purchase Location-Where products are sold New York Theater tickets vs. Road ShowsNew York Theater tickets vs. Road Shows Time of Purchase-Peak times=more $ Time of Purchase-Peak times=more $
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Psychological Pricing Strategies Odd Even Pricing housing market 299.0 vs. $300.0 housing market 299.0 vs. $300.0 Prestige Pricing Higher markup ex: Rolex watches, Mercedes Higher markup ex: Rolex watches, Mercedes Multiple Unit Pricing 3/$5.00 3/$5.00 Everyday Low Price-Walmart
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Promotional Pricing Loss Leader- set below cost Special Event-reduced for short period Rebates and Coupons
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Discounts and Allowances Cash Discounts- 2/10 net 30 Quantity Discounts Trade Discounts- 40% off line price (closeouts) Seasonal Discounts-Dumping items at the end of season Christmas, Halloween, swimwear Christmas, Halloween, swimwear Allowances Trade in’s on cars, major appliances, computer parts Trade in’s on cars, major appliances, computer parts
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Questions to Ask When Determining Prices What are your pricing objectives? Competition, market share, profitability Competition, market share, profitability What are the costs involved in manufacturing? What is the demand for your product? What does your competition charge? What should be your pricing strategy? Segmented, seasonal or location of market Segmented, seasonal or location of market What should be your price based on your answers to the above questions?
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