MT 219 Marketing Unit SixMarilyn Radu, Instructor

Pricing

Note: This seminar will be recorded by the instructor.

Agenda

• Unit 5 review

• Pricing

• Questions

Review of Unit 5

• How did Unit 5 go? Questions or concerns?

• Instructor suggestions for Unit 6

• Additional questions?

What is Price?

• Value exchanged for products-Money-Barter

• Only primary source of revenue

Price vs. Non-Price Competition

• In price competition, competitors seek to match or beat the price of competitors

• The major advantage is flexibility in a parity product market• The more a product is like a commodity, the more it is used

• In non-price competition, factors other than price are emphasized• This is especially useful when a marketer has a unique product,

and helps avoid price wars

Assessing Demand

• Demand refers to the quantity of product sold at a particular price over a particular period of time

• The demand curve graphs demand over a range of prices with other factors constant

• In most cases, demand goes up as price goes down• The exception is prestige products. Why?

Price Elasticity

• Measures the sensitivity of demand to price changes

• If acceptable substitutes are available, markets tend to be elastic

• If not, they tend to be inelastic

Pricing Objectives

• Survival- Not a good way to price unless necessary• Profit maximization- Most companies “optimize”• Target profit• Market share leadership• Product quality leadership

Pricing Limits

• Costs set the “floor” for price

• Businesses can’t survive in the long term selling below cost

• Perceived value sets the “ceiling”- Why?

Pricing Bases

• Cost Plus and Markup pricing- Frequently used in retailing

• Demand or value based- Can vary depending on what customer can pay

• Competition based ( status quo )

New Product Pricing

• Skimming – set initial price high. Useful for unique products when competition cannot follow quickly.

• Where does the term come from?• Examples?

• Penetration – set initial price low to capture as much of the market as possible before competition enters.

• Examples?

Product-Line Pricing Strategies

• Captive pricing- Often used for disposable items- water filters, air freshener replacements, etc.

• Premium pricing

• Bait pricing

• Price-Lining- Limited price points

Psychological Pricing

• Reference Pricing• Odd vs. even pricing• Multiple unit pricing• Customary pricing• Everyday low pricing• Prestige pricing• Bundle pricing

• Why so many?

Promotional Pricing

• Price leaders

• Loss leaders

• Special event pricing

Segmented Pricing

• Charging different segments different pricestime basedseasonallocation baseddemographic basis ( senior citizen, student

discounts)Pop machines that charge more on hot days

Pricing no-no’s

• Predatory pricing issues• Dumping• Other?

Any Questions?

Thank you for attending!

See you next week!