Pricing Products and Services

1. Pricing Products and Services Advanced Marketing

2. What is Price? The value in money (or it’s equivalent) for the exchange of a good or service.

3. psychological impactof 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

4. Strategies for Psychological Pricing • Prestige Pricing • Odd-Even Pricing • Multiple Unit Pricing • Buy One Get One (BOGO) • Every Day Low Price (EDLP)

5. 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: • Explanation of the strategy • Examples of businesses that use that strategy • How the strategy works to motivate the customer to buy and why is it a successful strategy • Create a PPT slide that summarizes the information on ONE SLIDE • Students will come back together as a large group and discuss their findings 50 Point assignment

6. Prestige Pricing

7. Odd-Even Pricing

8. Multiple Unit Pricing

9. Buy One get one free

10. Every day Low Pricing

11. 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

12. Impact of Price on Profitability • Profit Margin • Cost of Goods • Markup • Markdown • Gross Profit • Net Profit

13. 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

14. Cost Oriented Pricing Costs of acquiring or making product PLUS Expenses of doing business PLUS Projected profit margin Methods: Markup and Cost-Plus

15. 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

16. 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.

17. 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

18. Competition-Oriented Pricing • One of three actions after learning competitor price: • Price Above Competition • Price Below Competition • Price In-Line with Competition Competitive bid pricing is a type of competition-oriented pricing

19. 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