Product Pricing ApEc 4451 General Retail Strategies
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Product Pricing ApEc 4451 General Retail Strategies Presentation Transcript

  • 1. Product Pricing ApEc 4451
  • 2. General Retail Strategies
    • EDLP (everyday low pricing):
    • - Aimed at pricing continuity.
    • - Strive for low price, but not always the
    • lowest.
    • - Low price guarantee policy.
    • - Trend toward.
    • High/low pricing:
    • - Maintain a regular price typically.
    • - Occasional deep-discount sales price.
    • - Trend away from; role of manufacturers.
  • 3. Approaches to Product Pricing
    • Cost-oriented method:
    • - Also called markup pricing.
    • - Add a fixed % markup over cost.
    • - Used by retailers: % over COGs.
    • - Is quick and simple.
    • Demand-oriented method:
    • - Based on what customers expected
    • or willing to pay.
    • - Competition-oriented pricing.
    • - Customary pricing (vending machines).
    • - Loss-leader pricing.
  • 4. Profit-Oriented Methods: Used by producers
    • Target Profit Pricing: price to achieve a specific profit level.
    • Target Return-on-Sales Pricing: aim is to achieve profits that are specific percentage of sales volume.
    • - Supermarkets return on sales of 1-4%.
    • Target Return-on-Investment Pricing:
    • - Companies like GM set a ROI such as
    • 20%.
  • 5. Adjustments to list (normal) price
    • Quantity discounts (multiple-unit pricing.
    • Seasonal discounts.
    • Coupons: discount when purchased.
    • Rebates: portion of price returned to buyer.
    • Special event pricing.
  • 6. New product pricing: consider
    • Demand – potential number of consumers and elasticity of demand.
    • Newness of product- stage in lifecycle.
    • Cost of production and marketing.
    • Competition and its pricing.
  • 7. Special Pricing Strategies
    • Price bundling or Bundle pricing.
    • Variable pricing (zone pricing): charge different price in different stores, markets, or zones.
    • Skimming pricing: set a very high initial price that only a few customers will pay.
    • Penetration pricing: set a low initial price to appeal to mass market.
  • 8. Special pricing (continued)
    • Prestige pricing: sets high price to attract status-conscious consumers.
    • Price lining: price items in a product line at a number of different price points.
    • Odd pricing: $2.99; $495,000.
    • - Customers don’t think as $3.00 or half a million.
    • - Widely used, although may not work.
    • Demand-backward pricing: adjust quality to achieve desired price point.
  • 9. Internet Pricing
    • Consumers use for price search or comparison shopping; even if don’t buy on internet.
    • Auction pricing: Ebay; some companies use Ebay to sell overstocked, returned; out-of-season goods.
    • Low-bid pricing: Priceline; not sure of what purchasing (ex. Number of stops on flight or actual hotel).
    • Internet/home-delivery grocery shopping:
    • Simon Delivers – Coburn’s