Pricing Considerations and Strategies

1. Pricing Considerations and Strategies

4. Dynamic Pricing The Internet is ushering in a new era of fluid pricing. PriceSCAN.com is an independent site that provides product comparisons and guides, and searches all merchant sites for the best prices.

7. Three Approaches to Setting Prices Figure 9.1

8. Factors Affecting Pricing Decisions Figure 9.2

10. Product Quality Leadership Four Seasons starts with very high-quality service—”we await you with the perfect sanctuary.” It then charges a price to match.

15. Pricing in Different Types of Markets Pure Competition: Many buyers and sellers where each has little effect on the going market price Monopolistic Competition: Many buyers and sellers who trade over a range of prices Pure Monopoly: Market consists of a single seller Oligopolistic Competition: Few sellers who are sensitive to each other’s pricing/marketing strategies

16. Demand Curve A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged . Figure 9.3

17. Upward Sloping Demand Curve Gibson was surprised to learn that its high-quality instruments did not sell as well at lower prices.

20. Major Considerations in Setting Price Figure 9.5

22. Break-Even Chart for Determining Target Price Figure 9.6

24. Value pricing at the retail level Everyday low pricing (EDLP) Wal-Mart practices “everyday low prices” in order to build store traffic and increase sales volume

25. Cost-Based versus Value-Based Pricing Figure 9.7

26. Perceived Value A less expensive piano might play well, but would it take you places your have never been before?

30. Figure 9.8 Skimming vs. Penetration Pricing Strategies

31. Figure 9.9 Comparison of Slow Skimming and Rapid Penetration Pricing Strategies

34. Pricing Strategies By-Product Pricing: Setting a price for by-products in order to make the main product’s price more competitive (e.g., sawdust and Zoo Doo) Product Bundle Pricing: Combining several products and offering the bundle at a reduced price (e.g., computer with software and Internet access).

35. Discounts and Allowances Cash Quantity Functional Seasonal Trade-In Promotional Discounts Allowances

38. Promotional Pricing Special-Event Pricing Cash Rebates Low-Interest Financing Longer Warranties Free Maintenance Discounts Loss Leaders Temporarily pricing products below list price and sometimes even below cost to create buying excitement and urgency. Approaches:

39. Promotional Pricing Promotional pricing is used to draw traffic into stores and increase the volume of purchases

42. International Pricing Companies must decide what prices to charge in different countries.

43. Initiating Price Changes Excess Capacity Falling Market Share Dominate Market Through Lower Costs Cost Inflation Over-demand: Cannot Supply All Customers’ Needs Price Cuts Price Increases

44. Buyers’ Reactions to Price Changes What would you think if the price of Joy was suddenly cut in half?