Chapter 26 Section 2.pptx

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Marketing Essentials

n Chapter 26 Pricing Strategies

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SECTION 26.2

What You'll Learn

Setting Prices

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SECTION 26.2

_{Setting Prices}

Why It's Important

Now that you have studied pricing concepts and policies, it is time to look at the special pricing techniques that help companies

achieve their business goals. Then you will put all of that information into a single

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SECTION 26.2

_{Setting Prices}

Key Terms

_{psychological pricing} _{odd-even pricing}

_{prestige pricing}

_{multiple-unit pricing} _{bundle pricing}

_{promotional pricing}

_{everyday low prices}

(EDLP)

_{price lining}

_{discount pricing} _{trade discounts}

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SECTION 26.2

_{Setting Prices}

Two common pricing techniques marketers use are:

 _{psychological pricing}  _{discount pricing}

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SECTION 26.2

_{Setting Prices}

Psychological Pricing

Psychological pricing refers to techniques that create an illusion for customers or that make

shopping easier for them. Common psychological pricing techniques are:

 _{odd-even pricing}  _{prestige pricing}

 _{multiple-unit pricing}  _{bundle pricing}

 _{promotional pricing}

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SECTION 26.2

_{Setting Prices}

Odd-even pricing involves setting prices that end in either odd or even numbers. Odd numbers convey a bargain image; even numbers convey quality.

Prestige pricing involves setting

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SECTION 26.2

_{Setting Prices}

Multiple-unit pricing involves pricing items

in multiples to suggest a bargain and increase sales volume.

Bundle pricing involves including several

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SECTION 26.2

_{Setting Prices}

Promotional pricing is generally used in conjunction with sales promotions when prices are lower than

average.

 _{Loss-leader pricing}_{provides items at cost to}

attract customers.

 _In_{special-event pricing}_{, prices are reduced for a}

short period of time, such as a holiday sale.

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SECTION 26.2

_{Setting Prices}

Everyday low prices (EDLP) are low prices that are set on a consistent basis with no intention of raising them or offering discounts in the future.

Price lining involves offering all merchandise in a

given category at certain prices, such as $25, $35, and $50.

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SECTION 26.2

_{Setting Prices}

Discount pricing involves the seller's offering reductions from the usual price. They include:

 _cash  _quantity  _trade

 _{seasonal discounts}

 _{promotional discounts and allowances}

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SECTION 26.2

_{Setting Prices}

Cash discounts are offered to buyers to encourage them to pay their bills quickly.

Quantity discounts are offered to buyers for placing large orders.

 _{Noncumulative quantity discounts}_are

offered on one order.

 _{Cumulative quantity discounts}_{are offered}

on all orders over a specified period of time.

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SECTION 26.2

_{Setting Prices}

Trade discounts are the way manufacturers quote prices to wholesalers and retailers.

Manufacturers establish suggested retail prices for their items, then grant members of the

channel of distribution discounts from the list prices for performing their respective functions.

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SECTION 26.2

_{Setting Prices}

Seasonal discounts are offered to buyers willing to buy at a time outside the

customary buying season.

Promotional discounts are offered to

wholesalers and retailers willing to advertise or promote a manufacturer's products.

Allowances are granted to customers for selling back an old model.

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SECTION 26.2

_{Setting Prices}

These are the six steps in determining a price for an item:

1. Determine pricing objectives.

2. Study costs.

3. Estimate demand.

4. Study competition.

5. Decide on a pricing strategy.

6. Set price.

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SECTION 26.2

_{Setting Prices}

What is your purpose in setting a price? Do you want to increase sales volume or sales revenue? Establish a prestigious image? Increase your market share and market

position? Answering these questions will help you keep your prices in line with other

marketing decisions.

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SECTION 26.2

_{Setting Prices}

Since the main reason for being in business is to make a profit, give careful consideration to the costs involved in making or acquiring the goods or services you will offer for sale. Determine whether and how you can reduce costs without affecting the quality or image of your product.

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SECTION 26.2

_{Setting Prices}

Employ market research techniques to estimate consumer demand. The key to pricing goods and services is to set prices at the level consumers expect to pay. In many cases, those prices are directly related to demand.

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SECTION 26.2

_{Setting Prices}

Investigate your competitors to see what prices they are charging for similar goods and services. Study the market leader.

What is the range of prices from the ceiling price to the price floor? Will you price your goods lower than, equal to, or higher than your competitors'?

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SECTION 26.2

_{Setting Prices}

You may decide to price your product higher than the competition's because you believe your product is superior. You may decide to set a lower price with the understanding that you will raise it once the product is accepted in the marketplace.

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SECTION 26.2

_{Setting Prices}

After you have evaluated all the foregoing factors, apply the pricing techniques that match your strategy and set an initial price. Be prepared to monitor that price and

evaluate its effectiveness as conditions in the market change.

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26.2

A

SSESSMENTSSESSMENT

Reviewing Key Terms and Concepts

1. How are odd-even, prestige, multiple-unit, and bundle pricing related? Different?

2. What is the main difference between

promotional pricing and everyday low prices?

3. What is the key factor in deciding on price lines?

4. Name five types of discount pricing techniques.

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26.2

A

SSESSMENTSSESSMENT

Thinking Critically

Johnson & Johnson promoted its baby

shampoo to adult male athletes by touting the product's gentleness, even when used every day. At what stage in the shampoo's life cycle do you think this promotion took place? What do you think Johnson &

Johnson was trying to accomplish by

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