Module 12 Pricing Strategies

Total Customer Value (Pricing From the Customers Perspective)

Product Value

Service Value - Warranties/Guarantees

Personnel Value - Personal Service

Image Value - Reputation

Total Customer Cost (Pricing From the Customers Perspective)

Monetary Cost - $

Times Cost - Saves Time

Energy Cost - Saves Energy

Psychic Cost - Worries

Cost Considerations (Pricing from Supplier Perspective)

Price Ceiling - Highest Price Customers are Willing to Pay (Demand Based)

Price Floors - Lowest Amount to Pay (Cost Based Pricing (Most Common))

Reservation Pricing is in the Middle

As Info Increases Prices Decrease

Information Considerations (Pricing from Supplier Perspective)

Search Attributes - Goods

Experience Attributes - Services (Attributes Determined During or After Consumption)

Credence Attributes - Services (Difficult to Determine Attributes Even After Service)

Customers (4 Factors for Pricing Strategy)

Economic Shoppers - $ (E)

Personal Shoppers - Personalization (I)

Ethical Shoppers - Small Bus./Environment (I)

Apathetic Shoppers - Convenience (I)

Consumers (4 Factors for Pricing Strategy)

Elastic Demand - Price Sensitive

Inelastic Demand - Price Insensitive

Unitary Demand - Balance

Negative Income Elasticity - As Income Increases Demand Decreases (Inferior Products)

Positive Income Elasticity - As Income Increases Demand Increases (Superior Products)

Cross Price Elasticity - Demand for a product is relative to a price change in another (Netflix Price Increase Hulu Demand Increases)

Government (4 Factors for Pricing Strategy)

Horizontal Price Fixing (Illegal) (Between Companies)

Vertical Price Fixing (Illegal) (Within Channels)

Price Discrimination - Have to sell at Similar Prices (Within Channel)

Minimum Price Levels (Predatory Pricing) - Sell Below Cost to Drive Out Competitors

Unit Pricing - Price Per Ounce

Item Price Removal

Price Advertising - Have to be able to Prove Competitor Prices

Manufacturers and Other Suppliers (4 Factors for Pricing Strategy)

Role in Setting Price - Influence - MSRP

Selling Against a Brand (Battle of Brands) (Store Brand Vs. Name Brand)

Costs Charged to Retailers

Current and Potential Competitors (4 Factors for Pricing Strategy)

Competitive Environment → Price/Quality/Image

Reaction to Price Changes

As Prices Increase Competition Price Increases

If You Decrease Prices You Hope the Competition Keeps Their Prices the Same

Pricing Tactics

Customary Prices - Low Prices Kept Constant Over Time

Variable Pricing - Fluctuates on Market Price

One Price Policy (Norm in the US)

Flexible Pricing - Depends on Bargaining Ability

Odd Pricing - Psychological ($9.99 instead of $10)

Loss Leaders - Attracts Customers

Multiple Unit Pricing - 3 for $20 1 for $10

Price Lining - Pricing of Product Line

Pricing Adjustment

Markup % at Cost - (Retail Price - Cost) / Cost

Markup % at Retail - (Retail Price - Cost) / Retail