pricing strategy. understanding consumer value max price for yearbook? we each place different value...
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Pricing Strategy
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Understanding Consumer Value
• Max price for yearbook? • We each place different value
(and willing to pay different price) for the same product
• Key to pricing is “understanding the value that buyers place on a product or service”
• How is that done?
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Shirt Example
• Lax T-shirts: cost $4/shirt• Sell $10/shirt• Margin/profit: $6/shirt • Price markup is 150% (10-
4)/4=150%• Would lowering the selling
price to $7– Sell more shirts?– Increase total profits?
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Pricing Factors• Supply and Demand– When was the last time
you clearly overpaid for a product? Why?
– Peak and off-peak rates• Costs– To ensure a profit
• Competition– Evaluate Verizon vs.
Comcast• Combination of the
three above
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Market Share
• Market Share is the percentage of the total sales volume generated by all competitors in a given market.
• Iphones?
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Tickets
• Some minor league baseball games are $6. Many don’t offer discount tickets. Why?
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Substitutes – Brand Loyalty
• There are lots of products with available substitutes (cereals, detergents, etc.)
• Name a product where you would NOT accept a substitute?
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Psychological Pricing• Odd/even pricing: suggests bargains • Prestige pricing: suggests
exclusiveness• Multi-unit pricing: suggests a bargain
by pricing items in multiples (1 for $.33 or 3 for $.99)
• Bundle pricing: All inclusive trip, Verizon
• Promotional pricing: holidays, rebates• Discount pricing: based on quantity,
seasonal items, terms (cash or paying by certain date)
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Luxury vs. Necessity
• Gym membership• Cell phone• Cold medicine when you’re sick
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Urgency of Purchase
• When was the last time you bought something because of a time restriction?
• HHS tickets going on sale – more at door?• Gas when your car was on empty• Infomercial with time winding down
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Price wars
• Airline tickets, gasoline, computers• How much does price factoring in the three
products named above?• Is anyone loyal to an airline based on frequent
flyer miles (price & promotional tie in)?
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Conclusion
• Create awareness to sell right product, at the right place, at the right price to the right people.