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Pricing (Part II)
Jeremy Kees, Ph.D.
Select Pricing Method
• “3 Cs”
– Customer Demand
– Cost Function
– Competitors Prices
Pricing Strategies
• Skimming
– High-End Products
– Introduction Stage of the PLC
– Adidas / Fathead
• Penetration Pricing
– Generates Trials
Pricing Strategies
• Value Pricing - EDLP
– Wal-Mart – good example of EDLP?
• Competitive Pricing
– Compete on other product attributes
Strategies
• “Freemium” strategy —giving some
offering away for free while profiting
from extras that are priced appropriately
– Skype
– Ryanair
• Parody
• "We will charge for every possible thing we can
think to charge for, but it will always be the
passengers' choice whether they pay it or don't pay
it“ – Ryaniar CEO Michal O’Leary
Starbury Model…
• interview
“List” versus “Market” Prices
• Reductions from List Price
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Cash Discount
Trade Discount
Quantity Discount
Allowances
Rebates
Pricing Policies
• Price-Quality Inferences
– Moderated by category/product knowledge
• Price Cues
– Reference Prices
– Psychological Pricing
• Variable Pricing
• Negotiated Prices
• Fixed Pricing
• Product-Line Pricing
• Promotional Pricing
• Loss Leaders
• Bundling