Transcript Pricing – Q&A - Mr. George Academics

Pricing Strategy
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?
Shirt Example
•
•
•
•
Lax T-shirts: cost $4/shirt
Sell $10/shirt
Margin/profit: $6/shirt
Price markup is 150% (104)/4=150%
• Would lowering the selling
price to $7
– Sell more shirts?
– Increase total profits?
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
Market Share
• Market Share is
the percentage of
the total sales
volume
generated by all
competitors in a
given market.
• Iphones?
Tickets
• Some minor league baseball games are $6.
Many don’t offer discount tickets. Why?
Substitutes – Brand Loyalty
• There are lots of products with available
substitutes (cereals, detergents, etc.)
• Name a product where you would NOT accept
a substitute?
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)
Luxury vs. Necessity
• Gym membership
• Cell phone
• Cold medicine when you’re sick
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
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)?
Conclusion
• Create awareness to sell right
product, at the right place, at
the right price to the right
people.