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Special pricing strategies

Special pricing strategies. 3 common approaches to help find approximate price level. Demand-oriented Cost-oriented Competition-oriented. Demand-Oriented. Skimming – already looked at Penetration – already looked at Prestige Price Lining Odd-even Target Bundle Yield Management.

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Special pricing strategies

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  1. Special pricing strategies

  2. 3 common approaches to help find approximate price level • Demand-oriented • Cost-oriented • Competition-oriented

  3. Demand-Oriented • Skimming – already looked at • Penetration – already looked at • Prestige • Price Lining • Odd-even • Target • Bundle • Yield Management

  4. Prestige Pricing • Setting higher-than-average prices to suggest status and high quality to the consumer • Example: Very expensive sports watches, sports equipment, and apparel will be priced well above the average market price to attract consumers who may judge a product’s quality by its price.

  5. Price Lining • Selling all goods in a product line at specific price points. • Example: a business may decide to sell its warm-up suits at three price points: $39.99, $59.99, and $79.99. Makes it easier for customers to make purchasing decisions

  6. Odd-Even Pricing • Pricing goods with either an odd number or even number to match a product’s image • Example: $25.99, suggests a bargain. • Even-priced items reflect a quality item. Thus, more expensive goods are often price with even numbers such a $100.

  7. Target Pricing • Pricing goods according to what the customer is willing to pay. • Manufacturers estimate the target price and then work backwards to determine how much to charge wholesalers and retailers for that item.

  8. Bundle Pricing • Selling several items as a package for a set price • Products purchased individually would cost more than the package price. • Example: Buying team set of basketballs • Nintendo DS: Style Boutique

  9. Yield-Management Pricing • Pricing items at different prices to maximize revenue when limited capacity is involved • Example: Seats in a sports arena or stadium are limited by seating capacity. Some seats are priced higher than others due to their locations or the time they are purchased.

  10. Cost-Oriented • Markup • Cost-Plus

  11. Markup • Markup pricing is done by adding a percentage of the cost of a product to arrive at the selling price. • Example: • Cost $10 • Markup 40% of cost = $4 • Price to consumer = $14

  12. Cost-Plus Pricing • Pricing products by calculating all costs and expenses and adding desired profit • The cost of making the item or providing the service is determined first. • Example: food-service providers at sporting events determine the salaries of their employees, the cost of food supplies and rent, then they add their intended profit to set the prices to charge for food services.

  13. Competition-Oriented • Loss Leader

  14. Loss Leader Pricing • Offering popular items for sale below cost to attract customers into the store • Their total purchases for the shopping visit will more than cover the money lost on the loss leader. • Example: Movie theatre

  15. Theatre 19  Distributor 30 Movie studio 51 10 = Theater expenses 9 = left for theater 24 = Left for distributor 6 = Misc. expenses 20 = Advertising and publicity expense 8 = Actors’ share of gross 23 = Left for movie studio

  16. One-Price versus Flexible-Price Policy

  17. One-price Policy • One-price policy is when all the consumers are charged the same price – No Negotiation • Example: when you buy a Wilson Sting tennis racquet from a discount store, you are offered the product at a single price. You can buy it or not, but there is no variation in the price under the seller’s one-price policy.

  18. Flexible Pricing • Also referred to as dynamic pricing • Customers can negotiate a price. • Customers pay different prices for the same product • Example: • Sports Agents or talent agents negotiate the best possible deal for their client. • Sports Agents often go one step further in forms of endorsements (where the real money comes from) • https://www.youtube.com/watch?v=61dIPpRze_o&feature=plcp&list=FLExxEhNWl84KQj8HkVaW6zA

  19. Captive Pricing • Setting a low price for the primary product, but pricing the supplies needed to operate that product high. • Example: Rock band – all sold separately

  20. Supersizing • Increasing the amount of a low cost product and increasing the price by a small amount to encourage customers to buy more • Example: Movie popcorn

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