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Pricing Strategies

Pricing Strategies. BBI2 – Introduction to Business Adapted from an original PPT by Sameer Mathur, Ph.D.Assistant Professor (Marketing), McGill University. Price. Many Names. Pricing Strategies. Quality. Low. High. Market Penetration. Economy Pricing. Low. Price. Market Skimming.

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Pricing Strategies

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  1. PricingStrategies BBI2 – Introduction to Business Adapted from an original PPT by Sameer Mathur, Ph.D.Assistant Professor (Marketing), McGill University

  2. Price

  3. Many Names

  4. Pricing Strategies Quality Low High Market Penetration Economy Pricing Low Price Market Skimming Premium Pricing High

  5. Market Skimming Applies to new, distinctive products, early in the Product Life Cycle

  6. Market Skimming • Most consumer electronic products • The iPod was priced $259 in 2004.

  7. Captive Product Pricing

  8. Two Pricing Mistakes

  9. Economy Pricing

  10. PremiumPricing

  11. Price Adjustment Strategies • Discount / allowance • Segmented • Psychological • Promotional • Types of discounts • Cash discount • Quantity discount • Seasonal discount • Allowances • Trade-in allowances • Promotional allowances Strategies

  12. Quantity Discounts in Public Transport

  13. Two-part Tariffs Total Price = Retail Price + Shipping Price

  14. Seasonal Discounts

  15. Trade In

  16. (Pure) Bundling

  17. (Mixed) Bundling

  18. Price Adjustment Strategies • Discount / allowance • Segmented • Psychological • Promotional • 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 Strategies

  19. Pricing a Product-Line

  20. High Quality Toyota Camry W1 Low Quality Toyota Corolla Altis Product Lines in India

  21. Time Pricing

  22. Student Discounts in Public Transport

  23. Segmented Pricing Effectiveness • Market must be “segmentable” • Segments must show different demand • Pricing must be legal • Costs of segmentation cannot exceed revenues earned • Segmented pricing must reflect real differences in customers’ perceived value

  24. Price Adjustment Strategies • Discount / allowance • Segmented • Psychological • Promotional • International • 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 Strategies

  25. Psychological Pricing

  26. Psychological Pricing This ad for a luxury priced car attempts to show that Mercedes owners form important relationships with their cars

  27. Price Adjustment Strategies Strategies • Discount / allowance • Segmented • Psychological • Promotional • Temporarily pricing products below the list price or even below cost • Contracts, Special-event pricing • Cash rebates • Low-interest financing, warranties • Loss leaders

  28. P R O M O T I O N A L P R I C I N G Promotional Cellphone Pricing

  29. No Promotional Pricing

  30. Loss Leader

  31. No Loss Leader => Every Day Low Pricing

  32. Promotional Pricing - Challenges • Easily copied by competitors • Creates deal-prone consumers • Erode brand value • Industry Price Wars

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