PRICING STRATEGIES

Price

The price is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service

This is illegal

Price fixing

Deceptive pricing

Price discrimination

Price maintenance

Predatory pricing

Relevant facts for pricing

Customer Perceptions of Value

Market and Competition

Marketing Strategy, Objectives and Mix

Product Costs

costs that are those directly related to the production of a product or service intended for sale

Strategies

Skim & penetrate

Product mix

Product line

Optional product

Captive product

By-product

Product bundle

Price adjustment

Discount and allowance

Promotional pricing

Geographic pricing

Dynamic pricing

International pricing

Psychological pricing

Segmented pricing

MAJOR Pricing Strategies

Competition-Based Pricing

Setting prices based on competitorsʼ strategies, costs, prices, and market offerings

Consumers will base their judgments
of a productʼs value on the prices that
competitors charge for similar products

Customer Value-Based Pricing

Good-value pricing offers the right combination of quality and good service at a fair price.

Everyday low pricing (EDLP) charging a constant everyday low price with few or no temporary price discounts

Value-added pricing attaches valueadded features and services to differentiate offers, support higher prices, and build pricing power

High-low pricing charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

Uses the buyersʼ perceptions of value, not the sellers cost, as the key to pricing

Cost-Based Pricing

Cost-based pricing setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk

Fixed costs are the costs that do not vary with production or sales leve

Variable costs are the costs that vary with the level of production

Total costs are the sum of the fixed and variable costs for any given level of production

Cost-plus pricing adds a standard
markup to the cost of the product

Break-even pricing is the amount of money, or change in value, for which an asset must be sold to cover the costs of acquiring and owning it