Transcript Pricing

Pricing
“…the amount of money a seller is willing to
accept in exchange for a product at a given
time and under given circumstances.”
Copyright © Houghton Mifflin Company. All rights reserved.
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Price Affected By
• Supply and Demand
• Competitive Advantage
– Price
– Differentiation (nonprice competition)
• Buyers Perceptions
• Costs
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Buyers’ Perceptions of Price
F ED ER AL R E SE R VE N O TE
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F O R A L L D E B T S , P U B L I C A N D P R IV A T E
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T H I S N O T E IS L E G A L T E N D E R
F O R A L L D E B T S , P U B L I C A N D P R IV A T E
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F ED ER AL R E SE R VE N O TE
TH
ED ST
AT ES
F AAM
M ER
ICAA
THEE UN
U NIT
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STAT
ES OOF
ERIC
T H I S N O T E IS L E G A L T E N D E R
F O R A L L D E B T S , P U B L I C A N D P R IV A T E
L 70 7 44 62 9F
12
W A S H IN G T O N , D .C.
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A
H 293
L 70 74 46 29 F
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S E R IES
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19 85
O
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ON
NEE D
DO
OLLA
LLAR
F ED ER AL R E SE R VE N O TE
TH
ED ST
AT ES
F AAM
M ER
ICAA
THEE UN
U NIT
ITED
STAT
ES OOF
ERIC
T H I S N O T E IS L E G A L T E N D E R
F O R A L L D E B T S , P U B L I C A N D P R IV A T E
L 70 7 44 62 9F
12
W A S H IN G T O N , D .C.
12
A
H 293
L 70 74 46 29 F
12
S E R IES
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Price Sensitivity
Acceptance of
Ranges
Relation to
Competing Products
Quality
Copyright © Houghton Mifflin Company. All rights reserved.
©2007 Microsoft PowerPoint
13 | 3
Pricing Objectives
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Survival
Profit Maximization
Target ROI
Market-Share Goals
Status-Quo Pricing
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Methods: Cost- Based Pricing
Markup- amount seller adds to costs
Breakeven Quantity- number of units that must
be sold for total revenue to equal total cost
Total Revenue- total amount received from
sales of product
Total Cost = Fixed + Variable
 Fixed- incurred no matter how many produced/sold
 Variable- depends on number of units produced
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Other Pricing Methods
◊ Demand-Based
 High price when demand is strong
 Low price when demand is weak
◊ Competition-Based- costs and revenue
secondary to competitors’ prices
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New Product
Pricing Strategies
Price Skimmingcharge highest
possible price during
introduction stage
Penetration Pricingsetting low price for
new product to build
market share
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©2007 Microsoft Power Point
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Differential Pricing
Charging different prices to different buyers for
same quality and quantity
Negotiated- final price comes from bargaining
Secondary-Market- one price for primary target
market and different price for another market
Periodic Discounting- temporary price reduction
on patterned/systematic basis
Random discounting- temporary price reduction
on unsystematic basis
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Psychological Pricing
• Odd-Number- use odd numbers just below
whole-dollar amounts
• Multiple-Unit- single price for 2+ units
• Reference- price at moderate level and
positioning it near a more expensive model
• Bundle- package 2+ products and selling for
single price
• EDLPs- consistently low price
• Customary- based on tradition
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Product-Line Pricing
Captive- basic product priced low, price on item
required to operate it is high
Premium- highest-quality/most-versatile higher
than other models in product line
Price Lining- selling goods only at
predetermined prices that reflect definite price
breaks
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Promotional Pricing
Price Leaders- below usual markup, near or
below cost
Special-Event- price cutting linked to holiday,
season or event
Comparison Discounting- set at specific level
and comparing with higher price
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Pricing Business Products
Geographic
 FOB Origin
 FOB Destination
Transfer
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Discounting
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Trade
Quantity
Cash
Seasonal
Allowance
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