CHAPTER 18 & 19 PRICING & PRICING STRATEGIES

Why PRICING is important?

Pricing is an important aspect of every business because price is used to :

1. Create financial projections. 2. Establish a break even point. 3. Calculate profit and loss.

Pricing Objectives
1. Penetration pricing
Set low price to attract as many as customers as possible

Sales
4. Pricing stability
Price doesnt change much over time.

Profit
5. Return on Sales/Investment Pricing
Price of a product based on the target return on the amount invested in a product:

Pricing Goals

Competition
2. Competitive pricing

Track the price, cost, and relative quality of each competitors offer.

Prestige
3. Skimming
Set high price in the intro stage. High price perceived high quality for early adopters.

Some Specific Price Tactics

1. Product line pricing - set price range for each product lines.
Brand&Product
SAN REMO

2. Price bundling- 2 or more product for a single price

Price P50.50 P64.50

P64.50

Alfredo Spiral
Vegetable Spiral Spinach Fettuccini Spaghetti

P64.50
P64.50 P93.50

3. Complementary pricing giving off complementary vouchers, rebates, discounts, coupons, etc.

4. Everyday low pricing continuous low prices

Warehouse sales like Uniwide, SaveMore, etc.

7. Value Pricing price is at best value for your money

8. Hidden Price Increases ways of increasing price by cutting the quantity, decreasing quality, or adding surcharges.

Ex. Wensha Spa that offers Shabu-Shabu buffet inclusive of the massage fee.

Ex. Chips and junk food that decrease in size, but same price.

9. Second Market Pricing also called DUMPING. Useful pricing strategy when excess production exist.

10. Periodic Pricing seasonal pricing

Ex. US and UK base Signature brands that are no longer in demand and already out of season, are dumped and transported in foreign markets, particularly 3rd world countries.

5. Differential Pricing- different prices based on the type of customer, quantity, delivery time, payment terms.

6. Direct Price Discrimination Setting a different price for the same product in different segments to the market.
Universal Studios Hollywood Ticket prices

Pricing of gasoline rates for consumer and B2B market