Pricing Strategies
Chapter 26
Cost-Oriented Pricing
 Markup Pricing – difference between
cost and price
 Cost-Plus Pricing – costs and
expenses, plus desired profit
Cost-Oriented Examples
Demand-Oriented Pricing
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Consumer’s perceived value
Number of substitutes available
Brand loyalty
Minor differences – tickets, fridge
colors
Demand-Oriented Examples
Competition-Oriented Pricing
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Price Above
Price Below
Price In Line with Competition
Ignore Cost and Demand
Competitive-Bid Pricing
Competition-Oriented Examples
Combining Pricing Considerations
 Cost-Oriented determines the price
floor
 Demand-Oriented determines range
 Competition-Oriented determines
relative position
 Product to product considerations
Pricing Policies
 One-Price Policy – all customers are
charged the same price
 Flexible-Price Policy – customers pay
different prices for the same type or
amount of merchandise
 Bargaining takes place with cars,
antiques, furniture, and jewelry
 Internet sites – name your price
One-Price versus Flexible-Price
New Product Introduction
 Skimming Pricing – high price when
demand is greater than supply
 Penetration Pricing – lower price to
gain market share
Skimming versus Penetration
Psychological Pricing
 Techniques that create an illusion for
customers or that make shopping
easier for them
Odd-Even Pricing
 Setting prices that all end in either
odd or even numbers
 Odd numbers convey a bargain
($9.99, $79, $845.67)
 Even numbers convey a quality image
($100, $20, $50)
Odd-Even Pricing
Prestige Pricing
 Higher-than-average prices suggest
status and prestige
 Many assume higher price equals
higher quality
Prestige Example
Multiple-Unit Pricing
 Suggests a bargain and helps to
increase sales volume
 3 for $99
 The 1 for $2, 2 for $3, 3 for $5
dilemma
Multiple-Unit
Example
Bundle Pricing
 Several complementary products in a
package sold at a single price
 Help to sell items that may not have
sold on their own
Bundle Price Example
Promotional Pricing
 Loss leader
 Special event
 Rebates
Everyday Low Prices
 Low prices that are set on a
consistent basis with no intention of
raising them or offering discounts in
the future
 Sales stability
 Wal-Mart is famous for this
Everyday Low Prices Example
Price Lining
 All items in a certain category are set
at the same price. $25, $35, and
$50.
 Make the price differences large
enough to differentiate
 Allows sales people to easily offer a
more expensive (more profitable)
alternative
Price Lining Example
Discount Pricing
 Cash Discounts – incentives to pay
the bill early (2/10, net 30)
 Quantity Discounts – lower price for
larger quantity
 Trade Discounts – prices to
wholesalers versus retailers
 Seasonal Discounts – price change
based on time of year (Christmas
lights, mower)
Discount Pricing