Pricing+f2012
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The document discusses pricing strategies and determinants of price. It outlines pricing strategies such as being a price leader, follower, or nicher. It also discusses circumstantial strategies like penetration and skimming pricing. Determinants of price include internal factors like costs and margins, as well as external factors like competition, customers, and government regulations. The document also reviews different pricing tactics.
Pricing+f2012
- 1. Pricing • Importance of pricing • Pricing strategies • Determinants of price • Pricing tactics
- 2. Importance of Pricing • Pricing mistakes – Overpricing – Underpricing • Pricing as an indicator of quality • Value equation Benefits Value = Price – Pricing as exchange – Price parity not necessary – Value parity is necessary
- 3. Pricing Strategies • Generic strategies – Price leader – Price follower – Price nicher Automated Broker- Online Phone Assisted Trades1 Trades Trades <120 trades2 per year AND $12.95 for Online Online $999,999 or first 1,000 commission commission less in shares5 + $5.00 + $25.00 household balances3 120+ trades4 per year OR Online Online $1,000,000+ $8.95 commission commission in + $5.00 + $25.00 household balances3
- 4. Pricing Strategies • Circumstantial strategies – Penetration • Market share • Sales maximization – Skimming • Profit maximization • Milking
- 5. Pricing Strategies • iPad $499 • Kindle Fire $159
- 6. Pricing Strategies • Hyundai Sonata $20,000 • Audi A7 $70,000
- 7. Determinants of Price • Internal – Costs • Variable costs • Fixed costs • Markup pricing • Break-even pricing B/E = FC P – VC B/E = $1,000,000 = 200,000 $10 - $5 B/E = $1,000,000 = 500,000 $7 - $5 B/E = $1,000,000 = 100,000 $15 - $5
- 8. Determinants of Price • Internal – Margins Retail price $5.00 (100%) (67%) Wholesale price 3.00 (60%) (100%) Manufacturer’s price 1.50 (30%) (Base)
- 9. Determinants of Price • External – Gouging • Ethics • Invite in competition – Customers • Supply and demand • Price elasticity of demand • Brand equity/reputation • Internet/price transparency – Competition • Strategy
- 10. Determinants of Price • External – Government • Price fixing – Horizontal (unfair trade practices, restraint of trade) – Vertical • Price discrimination – Industrial goods – Quality, cost of service, performance of service • Predatory pricing • Deceptive pricing – Former price comparisons – Competitor comparisons – MSRP comparisons – Bait and switch
- 12. Pricing Tactics • Differential pricing – Single/variable price – Buy/lease – Second market discounting – Periodic discounting/EDLP • Inflationary pricing – Increase price – Decrease quantity • Psychological pricing – Prestige pricing – Reference pricing – Odd/even pricing
- 13. Pricing Tactics • Product line pricing – Captive pricing – Two-part pricing – Leader pricing • Bait/leader • Cherry picking – Price lining – Bundling – Multiple unit pricing