Download Pricing Products and Services

PRICING PRODUCTS AND
SERVICES
ADVANCED MARKETING
WHAT IS PRICE?
The value in money
(or it’s equivalent)
for the exchange of
a good or service.
PSYCHOLOGICAL IMPACT OF PRICING
• Psychological impact of pricing is
the customer’s emotional
response to the price
• Customers’ perception shapes
how a marketer determines price
of product or service
STRATEGIES FOR
PSYCHOLOGICAL PRICING
• Prestige Pricing
• Odd-Even Pricing
• Multiple Unit Pricing
• Buy One Get One (BOGO)
• Every Day Low Price (EDLP)
CLASS ACTIVITY
• Work individually or with a partner. Select one of the
psychological pricing strategies identified in previous
slide.
• Research the pricing strategy and identify the following:
1) Explanation of the strategy
2) Examples of businesses that use that strategy
3) How the strategy works to motivate the customer to
buy and why is it a successful strategy
4) Create a PPT slide that summarizes the information on
ONE SLIDE
5) Students will come back together as a large group
and discuss their findings
50 Point assignment
PRESTIGE PRICING
ODD-EVEN PRICING
MULTIPLE UNIT PRICING
BUY ONE GET ONE FREE
EVERY DAY LOW PRICING
CLASS PROJECT
• Work with a partner and identify a product or group
of products and apply psychological pricing to that
product.
• Create the promotional piece to inform customers
of the new pricing
• Prepare a PPT to present the pricing to the class.
• 50 Point assignment
IMPACT OF PRICE ON PROFITABILITY
• Profit Margin
• Cost of Goods
• Markup
• Markdown
• Gross Profit
• Net Profit
FACTORS IMPACTING PROFITABILITY
• Base Price- initial price of something; does not
include taxes, shipping and handling, or other fees
• Cost – value to produce; value to obtain
• Competition-struggle between businesses for
customers
• Demand- consumer willingness and ability to
purchase something
COST ORIENTED PRICING
Costs of acquiring or making product
PLUS
Expenses of doing business
PLUS
Projected profit margin
Methods: Markup and Cost-Plus
MARKUP PRICING
• Resellers add a dollar amount
(markup) to cost to arrive at price
• Example: Item cost $10 and % of
markup on cost is 40% ; retail price
would be $14: ($10 x .40) = $4.00; $10
+$4 = $14
COST-PLUS PRICING
• All costs and expenses are calculated and then
desired profit is added to arrive at price.
• Used primarily by manufacturers and service
companies
• More sophisticated than markup pricing because
all fixed and variable expenses are calculated
separately
• When manufacturer is running at full capacity, fixed
expenses allocated to each product becomes
smaller.
DEMAND ORIENTED PRICING
• Determine what customers are willing
to pay
• Consumers’ perceived value is key to
this method
• Relies on basic premise of supply and
demand
COMPETITION-ORIENTED PRICING
• One of three actions after learning competitor
price:
1) Price Above Competition
2) Price Below Competition
3) Price In-Line with Competition
Competitive bid pricing is a type of competitionoriented pricing
ESTABLISHING BASE PRICE
• All three pricing methods may be used
Class Activity:
Determine the price for the following items in The
Falcons’ Nest. You must use each method and
explain why you selected that method:
Ear Buds - Cost to Falcons Nest is $3.95
Phone Charger- Cost to Falcons Nest is $9.95
Orange/Navy Falcons’ Socks- $11.97