Pricing
What is Price?
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What influences a price?
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 Trends
 Competition
 Quality
 Cost to make and sell it
 How much the target customer will spend for it
 Profit that a company wants to make
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 Others?
PRICING STRATEGIES
1. Market Skimming
• Setting an initially high price for a product or service before
competitors enter the market
2. Penetration Pricing
• Setting an initially low price for their new product or service to attract
customers
3. Competition Pricing
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Pricing Objectives
• What goals are we trying to achieve through our pricing?
1.
2. Maximize sales (low price, attract customer away from competition,
leads to increased market share)
3.
4.
Return on Investment (compare profit to money invested)
Psychological Pricing (for Consumers)
 Set of pricing techniques to create a product image and entice customers to
buy
1.
2.
3.
4. Prestige Pricing (high pricing to imply product is prestigious; ex. Jaguar,
Gucci, Tiffany)
5. Price Lining (ex. 3 levels of product w/ different # of features, high price w/
more features)
Unit Pricing (for Consumers
• Displays price per unit
• Ex. Gasoline $1.38 per litre
•
Discount Pricing (for Retailers)
1.
2.
3.
4. Seasonal Discount (retailers place orders well ahead of time, ex. Ordering
next year’s Halloween product in December)
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Negotiated Pricing
• When both the buyer and seller of a product discuss at what price
they will buy or sell the product
•
6 Factors that affect Price
1) Law
Price fixing
Retail price maintenance
MSRP manufacturer’s suggested retail price; may or may not be used as the list
price by retailers
Deceptive pricing practices:
•
Bait and switch –
2) Competition Prices - Affected by Internet:
3) Positioning:
4) Consumer Demand
How much are consumers willing to pay?
Always easier to reduce prices, very hard to increase prices
Price Sensitivity:
5) Marketing Boards
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Provide marketing info to producer-members
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Some set the prices, a few limit production
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6) Economic conditions
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• Remember, increased demand
higher prices
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• Decreased demand
lower prices
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• Why?