1. Copyright © 2007 Pearson Education Canada 11-1 Psychological Pricing Appeals to tendencies in consumer behaviour.  Prestige Pricing  Odd-Even Pricing  Price Lining  Customary Pricing  Unit Pricing

2. Copyright © 2007 Pearson Education Canada 11-2 Promotional Pricing “Strategies to reduce prices temporarily.”  Loss Leaders  Multiple Unit Pricing Honest Ed’s is for the birds. CHEAP, CHEAP, CHEAP!!!

3. Copyright © 2007 Pearson Education Canada 11-3 Geographic Pricing Geography has an impact on the way prices are quoted. F.O.B. Origin F.O.B. Origin F.O.B. Destination F.O.B. Destination Freight not included; buyer pays. Freight included; seller pays.

4. Copyright © 2007 Pearson Education Canada 11-4 Other Geographic Policies Uniform Delivered Price Uniform Delivered Price Zone Pricing Zone Pricing Customers pay an average freight regardless of location. Nearby customers pay “phantom freight.” An average freight charge applies to all customers in a region or zone.

5. Copyright © 2007 Pearson Education Canada 11-5 Flexible Pricing A policy that allows for price negotiation. Different customers may pay a different price for the same product. Hotel Rooms Airline Seats Houses Cars Hotel Rooms Airline Seats Houses Cars When flying don’t ask the person beside you what they paid. It might ruin your trip!

6. Copyright © 2007 Pearson Education Canada 11-6 Product Mix Pricing Prices are set to maximize profits for the product mix (all lines). Optional-feature pricing Product-line pricing Captive-product pricing Fixed-variable pricing Product-bundling pricing Some products may be priced low; others high.

7. Copyright © 2007 Pearson Education Canada 11-7 Bundling and Prices A strategy to group products and services together at one low rate. Additional incentives are often provided to stimulate purchase.

8. Copyright © 2007 Pearson Education Canada 11-8 Managing Price A list price is established and then incentives are offered to sell in greater volume. Quantity Discount Slotting Allowance Trade Allowance Performance Allowance Seasonal Discounts and Rebates

9. Copyright © 2007 Pearson Education Canada 11-9 The Trade Package Slotting Allowance Slotting Allowance Off-Invoice Allowance Off-Invoice Allowance Performance Allowance Performance Allowance To secure shelf space at retail To encourage volume buying To encourage merchandising action A package of incentives at one time encourages action among channel members.

10. Copyright © 2007 Pearson Education Canada 11-10 Seasonal Discounts and Rebates Seasonal Discounts Seasonal Discounts Off-season or pre-season discounts to build volume. Rebates Periodic and temporary “cash back” discounts to stimulate sales immediately.

11. Copyright © 2007 Pearson Education Canada 11-11 Value Pricing Companies evaluate how to offer lower prices. It is a battle between regular prices followed by sale prices and everyday low prices all of the time. Wal-Mart Sears, Bay, Zellers Sears, Bay, Zellers The undisputed king of EDLP. They have tried EDLP but find their customers prefer sale prices.

12. Copyright © 2007 Pearson Education Canada 11-12 Value Pricing Manufacturers accustom to offering discounts are evaluating value pricing. Repetitive discounts reduces profit margins. Retailers in oligopoly markets exert control and demand discounts from manufacturers. The like forward buying: Buying deal merchandise in quantities sufficient to last until the next discount offer. Forward Buying Forward Buying

13. Copyright © 2007 Pearson Education Canada 11-13 New Product Pricing Price Skimming Price Skimming High entry price to maximize revenue. Appropriate if: Product is innovative Competition is limited Patent protection is possible

14. Copyright © 2007 Pearson Education Canada 11-14 New Product Pricing Price Penetration Price Penetration Low entry price to gain acceptance quickly Appropriate if: Demand is elastic Product costs are low Market segmented on price

15. Copyright © 2007 Pearson Education Canada 11-15 Leasing A contractual agreement whereby a lessor (owner), for a fee, agrees to rent an item to a lessee for a specified period. Types of Leases 1.Operating Leases 2.Full Payout Leases

16. Copyright © 2007 Pearson Education Canada 11-16 Leasing Benefits for Company 1.A sale is made that could have been lost 2.Same amount of funds but over a longer period 3.Monthly payments assist with cash flow

17. Copyright © 2007 Pearson Education Canada 11-17 Leasing Benefits for Customer 1.No capital outlay (no debt) 2.Capital preserved for other uses 3.Upgrade potential during lease period To lease or buy. What is best?