Pricing Strategy

Pricing Strategy

Understanding Consumer Value Max price for yearbook? We each place different value (and willing to pay different price) for the same product Key to pricing is “understanding the value that buyers place on a product or service” How is that done?

Shirt Example Lax T-shirts: cost 4/shirt Sell 10/shirt Margin/profit: 6/shirt Price markup is 150% (104)/4 150% Would lowering the selling price to 7 – Sell more shirts? – Increase total profits?

Pricing Factors Supply and Demand – When was the last time you clearly overpaid for a product? Why? – Peak and off-peak rates Costs – To ensure a profit Competition – Evaluate Verizon vs. Comcast Combination of the three above

Market Share Market Share is the percentage of the total sales volume generated by all competitors in a given market. Iphones?

Tickets Some minor league baseball games are 6. Many don’t offer discount tickets. Why?

Substitutes – Brand Loyalty There are lots of products with available substitutes (cereals, detergents, etc.) Name a product where you would NOT accept a substitute?

Psychological Pricing Odd/even pricing: suggests bargains Prestige pricing: suggests exclusiveness Multi-unit pricing: suggests a bargain by pricing items in multiples (1 for .33 or 3 for .99) Bundle pricing: All inclusive trip, Verizon Promotional pricing: holidays, rebates Discount pricing: based on quantity, seasonal items, terms (cash or paying by certain date)

Luxury vs. Necessity Gym membership Cell phone Cold medicine when you’re sick

Urgency of Purchase When was the last time you bought something because of a time restriction? HHS tickets going on sale – more at door? Gas when your car was on empty Infomercial with time winding down

Price wars Airline tickets, gasoline, computers How much does price factoring in the three products named above? Is anyone loyal to an airline based on frequent flyer miles (price & promotional tie in)?

Conclusion Create awareness to sell right product, at the right place, at the right price to the right people.