© 2002 mcgraw-hill companies, inc., mcgraw-hill/irwin steps in setting price

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Steps in setting priceSteps in setting price

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

STEP 4: SELECT AN APPROXIMATE PRICE LEVEL

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• Demand-Oriented Approaches• Skimming Pricing

• Penetration Pricing

• Prestige Pricing

• Price Lining

STEP 4: SELECT AN APPROXIMATE PRICE LEVEL

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Demand curves for two types of demand-oriented Demand curves for two types of demand-oriented approachesapproaches

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• Demand-Oriented Approaches

• Odd-Even Pricing

• Target Pricing

• Bundle Pricing

• Yield Management Pricing

STEP 4: SELECT AN APPROXIMATE PRICE LEVEL

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• Cost-Oriented Approaches• Standard Markup Pricing

• Cost-Plus Pricing

• Experience Curve Pricing

STEP 4: SELECT AN APPROXIMATE PRICE LEVEL

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• Profit-Oriented Approaches• Target Profit Pricing

• Target Return-on-Sales Pricing

• Target Return-on-Investment Pricing

STEP 4: SELECT AN APPROXIMATE PRICE LEVEL

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• Competition-Oriented Approaches• Customary Pricing

• Above- At- or Below- Market Pricing

• Loss-Leader Pricing

STEP 4: SELECT AN APPROXIMATE PRICE LEVEL

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• One-Price versus Flexible-Price Policy

STEP 5: SET THE LIST OR QUOTED PRICE

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

One-Price Policy

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• Company, Customer, and Competitive Effects• Company Effects

Product-line pricing

• Customer Effects

STEP 5: SET THE LIST OR QUOTED PRICE

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Frito-Lay ProductsSubstitutes and complements:

Information for product-line pricing

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• Company, Customer, and Competitive Effects (cont)• Competitive Effects

Price war

• Balancing Incremental Costs and Revenues

STEP 5: SET THE LIST OR QUOTED PRICE

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The power of marginal analysis in real-world decisionsThe power of marginal analysis in real-world decisions

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

STEP 6: MAKE SPECIAL ADJUSTMENTS TO THE LIST OR QUOTED PRICE

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• Discounts• Quantity Discounts

• Seasonal Discounts

• Trade (Functional) Discounts

• Cash Discounts

STEP 6: MAKE SPECIAL ADJUSTMENTS TO THE LIST OR QUOTED PRICE

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Toro AdSeasonal discounts

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The structure of trade discountsThe structure of trade discounts

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• Allowances• Trade-In Allowances

• Promotional Allowances Everyday low pricing

• Geographical Adjustments• FOB Origin Pricing

• Uniform Delivered Pricing

• Basing-Point Pricing

STEP 6: MAKE SPECIAL ADJUSTMENTS TO THE LIST OR QUOTED PRICE

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• Legal and Regulatory Aspects of Pricing• Price Fixing

• Price Discrimination

• Deceptive Pricing

• Geographical Pricing

• Predatory Pricing

STEP 6: MAKE SPECIAL ADJUSTMENTS TO THE LIST OR QUOTED PRICE

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Pricing practices affected by legal restrictionsPricing practices affected by legal restrictions