Pricing

iPad Mini $329+
• Kindle Fire
• Nexus 7
• Both $199

What is Price?
• What is given up for the product
• The only P that directly generates revenue
• Price can be an indicator
– Value
– Quality

Things to consider…
• Competition
• Costs
• Company objectives
• Customers
• Channel members

Company PRICE objectives
• Profit Oriented
– Profit Maximization
– Satisfactory Profits
– Target ROI
• Sales Oriented
– Market Share
– Sales Maximization

Company PRICE Objectives
• Competitor Oriented
– Parity
– Status quo
• Customer Oriented
– Value for a specific TM

How Customers influence price
• Demand

• Supply

Price Equilibrium

However…..
• Supply and demand analysis
– Don’t account for marketing
– Or branding
– Or differing curves
• Luxury goods, where higher price leads to higher demand

Still on Customers influence
• Elasticity of demand
– Elastic
– Inelastic
• What influences elasticity
– Income/Purchasing power
– Substitutes
– Durability
– Other uses
– Cross-price elasticity
• Complimentary products

• Variable
• Fixed
• Total
Costs

Break Even Analysis
• The point at which your profit is neither negative or positive
• FC/CPU

Competition
• Monopoly  ONE firm
– Cable, FPL
• Oligopoly  Handful of firms
– Airlines
• Monopolistic Competition  many firms, differentiated products, different prices
– Most common
• Pure Competition  many firms, commodities, same prices
– Wheat

Other influences on Price
• Internet
– Shopping bots
– Auctions
• Stage in PLC
• Distribution Strategy – match of YOURS with the CHANNEL

Pricing Strategy
• Price Skimming
• Penetration Pricing
• Status Quo

Price Skimming

Penetration Pricing

Unfair Practices
• Price Fixing/Collusion
• Discrimination (only for products)
• Predatory Pricing
– Charge low to kill competition

Other common Tactics
• Odd/Even pricing
– $99.95
• Price Bundling
• Two Part pricing
– Air Ticket, baggage fee, meal and seat