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Marketing. Product / Price / Promotion / Place. Pricing Strategies. Quality. Low. High. Market Penetration. Economy Pricing. Low. Price. Market Skimming. Premium Pricing. High. Pricing Strategies: Market Skimming.
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Marketing... Product / Price / Promotion / Place
Pricing Strategies Quality Low High Market Penetration Economy Pricing Low Price Market Skimming Premium Pricing High
Pricing Strategies: Market Skimming Applies to new, distinctive products, early in the Product Life Cycle
Pricing Strategies: Market Skimming • Common when there is little competition • Set the price high and reach BEP quickly • Sometimes used to limit demand if you cannot produce enough to meet heavy demand • Initial high price attracts wealthy trendsetters • Most new consumer electronic products practice this pricing technique The iPod was priced $259 in 2004. The PS3 was priced $599 in 2007.
Pricing Strategies: Captive Product Pricing Products that require a “refill” component can command a captive price. Examples are cartridges for razors, water filters and printers…
Pricing Adjustment Strategies Strategies • Types of discounts • Cash discount • Quantity discount • Seasonal discount • Allowances • Trade-in allowances • Promotional allowances • Discount / allowance • Segmented • Psychological • Promotional • Competitive
Pricing Adjustment Strategies: Discount / allowance • Quantity discount • Cash discount
Pricing Adjustment Strategies: Discount / allowance Seasonal Discounts • Trade-in allowances
Pricing Adjustment Strategies Strategies • Types of segmented pricing strategies: • Product-line pricing • Location pricing • Time pricing • Also called revenue or yield management • Certain conditions must exist for segmented pricing to be effective • Discount / allowance • Segmented • Psychological • Promotional • Competitive
Pricing Adjustment Strategies: Segmented Pricing a Product-Line
Pricing Adjustment Strategies Strategies • The price is used to say something about the product. • Price-quality relationship • Reference prices • Differences as small as five cents can be important • Numeric digits may have symbolic and visual qualities that psychologically influence the buyer • Discount / allowance • Segmented • Psychological • Promotional • Competitive
Psychological Pricing Psychological pricing occurs when sellers consider the psychological factors of price. The price tag on a pair of moccasin UGG slippers is $100. The price on a pair that looks almost identical, sold at L.L. Bean is half that at $49.95. The difference in price is not due to a drastic difference in quality, both are made from sheepskin and both have indoor/outdoor soles, the difference in price is an example of psychological pricing. The UGG Slipper: $100 The L.L. Bean Slipper: $49.95
Pricing Adjustment Strategies Strategies • Temporarily pricing products below the list price or even below cost • Contracts, Special-event pricing • Cash rebates • Low-interest financing, warranties • Loss leaders • Discount / allowance • Segmented • Psychological • Promotional • Competitive
Pricing Adjustment Strategies: Promotional Loss Leader Good or service advertised and sold at below cost price. Its purpose is to bring customers in the store (usually a supermarket) on the assumption that, once inside the store, customers will be stimulated to buy full priced items as well.
Challenges: Pricing Adjustment Strategies: Promotional • Easily copied by competitors • Creates deal-prone consumers • Erode brand value • Industry Price Wars
Pricing Adjustment Strategies Strategies • most popular strategy • products in a specific category match/follow competitors closely • companies compete using something other than price: ads, promos, distribution, product features • manufacturer with largest market share, first product, or longest on market sets benchmark price • others compare their product, set their price in relation (remember costs vs benefits = value) • Discount / allowance • Segmented • Psychological • Promotional • Competitive
Pricing Adjustment Strategies • Competitive Pricing • - some retailers have a strict competitive price policy and will meet or beat others’ prices • - some stores hire competitive shoppers who research the competition to ensure best price
Pricing Adjustment Strategies: Competitive No Loss Leader => Every Day Low (or Competitive) Pricing
