Entrepreneurship
Mr. Bernstein
Pricing Strategy, pp 230-247
October 2015
Entrepreneurship
Mr. Bernstein
Factors Affecting Price
Costs – Fixed or Variable
Supply and Demand
Consumer Perceptions
Competition
What are your objectives?
Return on Investment
Gaining Market Share
Cash Flow / Survival
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Entrepreneurship
Mr. Bernstein
Pricing Strategy Approaches
Cost-Based Pricing
Cost plus markup
Demand-Based Pricing
“What the market will bear”
Competition-Based Pricing
“Price Takers”
Flexible or One-Price Policy
What approach(es) would you use? Why?
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Entrepreneurship
Mr. Bernstein
Pricing Techniques
Psychological pricing:
Prestige pricing
Odd/even pricing
Promotional pricing
Multiple Unit discounts
Bundle pricing
Price lining
What are examples of each?
4
Entrepreneurship
Mr. Bernstein
Analyzing Pricing
Break-even Analysis: Number of units that must be
sold to cover fixed costs
Fixed Costs / (Unit Selling Price – Variable Costs)
= Break-Even Point
5
Entrepreneurship
Mr. Bernstein
Analyzing Pricing
Markup: Amount added to the cost of an item
Cost + Markup = Price
Markup / Cost = Percentage Markup
AKA “Gross Margin”; doesn’t include overhead costs
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Entrepreneurship
Mr. Bernstein
How often should pricing be revised?
Elastic demand – revise often
Do you compete primarily on price, service or
quality?
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