pricing strategies ch. 26 me. basic pricing policies section 26.1
TRANSCRIPT
Pricing StrategiesCh. 26 ME
Basic Pricing PoliciesSection 26.1
Cost-Oriented Pricing Marketers first calculate the costs of acquiring or making a
product and their expenses of doing business Mark-Up Pricing – resellers add a dollar amount to their
cost to arrive at a price Cost-Plus Pricing – all costs and expenses are calculated,
and then the desired profit is added to arrive at a price Demand-Oriented Pricing – determines what
consumers are willing to pay for given goods and services Pricing is dependent on the consumer’s perceived value of
the item
Basic Pricing Concepts
Competition-Oriented Pricing 1. Price above the competition2. Price below the competition3. Price in line with the competition (Going-Rate Pricing) There is no relationship between the cost and price or
between the demand and price Competitive-Bid Pricing – determines the price for a
product based on bids submitted by companies to a company or government agency
Establishing Base Price – all three pricing strategies can be used
Basic Pricing Concepts
One-Price Policy – is one in which all customers are charged the same pricesFlexible-Price Policy – is one in which customers pay different prices for the same type or amount of merchandise
Pricing Policies
Skimming Pricing – is a pricing policy that sets a very high price for a new productPenetration Pricing – the price for a new product is set very low
Non-Going Rate Strategies
Which Close – encourages a customer to make a decision between two itemsStanding-Room-Only Close – is used when a product is in short supply or when the price will be going up in the near futureDirect Close – is a method in which you ask for the saleService Close – is a closing in which you explain services that overcome obstacles or problems
Specialized Methods for Closing the Sale
Not every sale presentation will result in a saleGet FeedbackMaintain a Positive Attitude
Prepare for future sales callsSuccess in sales
Failure to Close the Sale
Strategies in the Pricing Process
1. Section 26.2
Product Mix Pricing Strategies – involve adjusting prices to maximize the profitability for a group of product rather than on just one item Price Lining – is a special pricing technique that sets a
limited number of prices for specific groups or lines of merchandise
Optional Product – sets prices for accessories or options sold with the main product
Captive Product – sets the price for one product low but compensates for that low price by pricing the supplies needed to operate that product high
Product Mix Strategies
By-Product – helps businesses get rid of excess materials used in making a product by using low prices
Bundle Pricing – a company offers several complimentary products in a package that is sold at a single price
Geographical Pricing – refers to price adjustments required because of the location of the customer for delivery of products
Product Mix Strategies
Segmented Pricing Strategy – uses two or more different prices for a product, even though there is no difference in the item’s cost Buyer Identification – recognizes a buyer’s sensitivity Product Design – create different prices for different
product styles that do not reflect the cost of making the item, but the demand for a given style
Purchase Location – involves pricing according to where a product is sold and/or the location of the good or service
Time of Purchase – prices charged according to demand based on time of day
Segmented Pricing Strategies
Psychological Pricing – are pricing techniques that help create an illusion for customers Odd-Even Pricing – involves setting prices that all end in
either odd or even numbers Odd numbers convey a bargain Even numbers convey a quality image
Prestige Pricing – sets higher-than-average prices to suggest status and higher quality to the consumer
Multiple-Line Pricing – suggests a bargain and helps to increase sales volume
Everyday Low Prices (EDLP) – are low prices set on a consistent basis with no intention of raising then or offering discounts in the future
Psychological Pricing Strategies
Promotional Pricing – is generally used in conjunction with sales promotions where prices are reduced for a short period of time Loss Leader Pricing – is used to increase store traffic by
offering very popular items of merchandise for sale at below-cost prices
Special-Event – items are reduced in price for a short period of time, based on specific happenings
Rebates and Coupons Rebates – are partial refunds provided by the manufacturer Coupons – allow customers to take reductions at the time of
purchase
Promotional Pricing
Cash Discounts – are offered to buyers to encourage them to pay their bills quickly
Quality Discounts – are offered to buyers for placing large orders Non-Cumulative – offered on one order Cumulative – offered on all orders over a specified period of
time Trade Discounts – the way manufacturers quote prices to
wholesalers and retailers Seasonal Discounts – are offered to buyers willing to buy
at a time outside the customary buying season Allowances – go to directly to the buyer after a trade-in
Discounts and Allowances
1. Establish Pricing Objectives2. Determine Costs3. Estimate Demand4. Study Competition5. Decide on a Pricing Strategy6. Set Prices
Steps in Determining Prices