1. Objectives: Name 3 pricing policies used to establish base pricing Explain 2 polar pricing policies for introducing a new product Provide examples of psychological pricing strategies

2. Cost-Oriented Pricing – determine cost first Mark-Up Pricing – Cost + a specific percentage. Cost-Plus Pricing – Cost + a specific dollar amount Demand-Oriented Pricing – based on what consumers are willing to pay – perceived value. Competition-Oriented Pricing – based on what competitors are charging (at, below, above) All three methods are considered

3. Two pricing approaches Pricing backward from retail price Used to determine wholesale price Take retail price, work backward subtracting mark-ups Shoes Retail Price = $75. Retailer mark-up 40% $75 x.40 = $30. $75 - $30 = $45 (wholesale price)

4. Two pricing approaches continued Pricing forward from manufacturer’s cost Used to determine retail price Use manufacturing price, work forward, adding mark-ups Shoes Cost to manufacture = $20 Intended manufacturer’s profit = $15. Price to wholesaler = $45 Intended wholesaler profit = $15 Price to retailer = $60 Intended retailer profit = $15 Price to consumer = $75

5. Multiple Unit – offering more than one unit of an item in a package at a single price. Prestige – higher than average pricing to suggest status and high quality to consumer Bundle – offering complimentary products in a package sold at a single price Promotional – prices are reduced for a temporary period of time, generally used in conjunction with sales promotions Everyday Low Pricing (EDLP) – setting prices low with no intention of raising or offering discounts in the future.

6. Assignment: Unit Study Guide.