Rizal Technological University

Brgy. Malamig, Boni Avenue Mandaluyong City

College of Business and Entrepreneurial Technology
BSBA Marketing Management

GROUP ?
LO11: CALCULATE PRODUCT/SERVICE PRICING

The 3-step guide

Product Pricing Calculator

Charm Pricing

Rule of 100
LO12: ANALYZE THE ISSUES IN PRICING STRATEGY FOR SERVICES

Price Position Sought For

Novelty of the Offering

LO13: SOLVE CALCULATION PROBLEMS ON LO11

Exercise Number 1

LO14: SOLVE CALCULATION PROBLEMS ON LO11

Exercise Number 2

Submitted by: Section:

Piedad, Jonathan CBET19-403P
Gaviola, Jenny Submitted to:
Bacsafra, Jenalyn Dr. Ester T. Edralin
Esteban, Pauline Rose Date:
Magcawas, Mardy
Bas, Charlotte Kaye
Oberlin, Chanel
Garcia, Ronnie
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

The 3-Step Guide -Brian Peters

Product pricing is an essential element in determining the success of your product or
service, yet eCommerce entrepreneurs and businesses often only consider pricing as an
afterthought. They settle and use the first price that comes to mind, copy competitors, or (even
worse) guess.
STEP 1: FIND A BASE PRICE BY GETTING TO KNOW COMMON PRICING
STRATEGIES IN YOUR INDUSTRY
Thousands of entrepreneurs and decades of learning have paved the way for new
businesses to craft a strategy that utilizes the most innovative pricing options available.
Knowing which pricing models work best in your industry can simplify how you price a
product, and give you confidence knowing that you’re not simply guessing.
 COST-BASED PRICING
Cost based pricing is one of the pricing methods of determining the selling price of a
product by the company, wherein the price of a product is determined by adding a profit
element (percentage) in addition to the cost of making the product.

 MARKET-ORIENTED PRICING
Also referred to as a competition-based pricing strategy, market-oriented pricing
compares similar products (competition) in the market. The seller sets the price higher or
lower than their competitors depending on how well their own product matches up.
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

Price
above market: Consciously pricing your product above the competition to brand
yourself as having a higher-quality or better-performing item.
Copy market: Selling your item at the same price as your competition to
maximize profit while staying competitive
Price below market: Using data as a benchmark and consciously pricing a
product below competitors, to lure customers into your store over theirs.
 DYNAMIC PRICING
Dynamic pricing, also referred to as demand pricing or time-based pricing, is a
strategy in which businesses set flexible prices for a product or service based on current
market demands.

STEP 2: CAPTURE MORE MARKET SHARE BY EXPERIMENTING WITH

PRICING (AND UNDERSTANDING PRICE ELASTICITY)
Lots of businesses fall into the trap of thinking if they lower product prices, more
people will buy the product and their revenue will increase. Strategically lowering product
costs does have benefits, and can lead to increased revenue. For one, it reduces the
amount of money being left on the table (consumer surplus) for customers who are willing
to buy at various price points.
Consumer Surplus is the difference between what the consumer pays and what he would
have been willing to pay.
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

Price Elasticity is a measure of the relationship between a change in the quantity

demanded of a particular good and a change in its price. If the quantity demanded of a
product exhibits a large change in response to its price change, it is termed “elastic.”
For a second, imagine you have 100 customers that purchase your product:

After testing pricing, you find customers convert at different rates depending on the
price of the product. You also find that sales volume fluctuates with price:
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
Given this
College of Business and Entrepreneurial Technology
small amount of
BSBA Marketing Management
data, you can
now easily
calculate how much revenue is generated from each price point. Theoretically, this is a
great way to improve upon the “base” product price that you calculated in step one:

But there’s one small problem…

What about the 65 customers that would have purchased at a $5 or $10 price
point?
That’s $450 in revenue that you are losing out on. No sane business owner
wants to do that, which is why you need a strategy to unlock that untapped gold mine.
This can be addressed through other pricing strategies that were already
discussed in previous lessons.
DISCOUNT PRICING
Discount pricing is one type of pricing strategy where you mark down the prices of
your merchandise. The goal of a discount pricing strategy is to increase customer traffic,
clear old inventory from your business, and increase sales. -Rachel Blakely-Gray
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

Businesses use discount pricing to sell low-priced products in high volumes. With
this strategy, it is important to decrease costs and stay competitive.
https://www.unleashedsoftware.com/blog/discount-pricing-strategy-explained
A valuation approach where items are sometimes initially marked up artificially but
are then offered for sale at what seems to be a reduced cost to the consumer.
http://www.businessdictionary.com/definition/discount-pricing.html
A discount pricing strategy temporarily decreases the price of a good or service
for a specific amount of time.
https://www.priceintelligently.com/blog/bid/170106/how-discounting-is-killing-your-
pricing-strategy
Discount pricing is a strategy where items are initially marked up artificially or start
at a higher price, but are then offered for sale at what seems to be a reduced cost to the
consumer.
https://sumo.com/stories/how-to-price-a-product

You can also use other pricing strategies that were discussed in previous lessons:
LOSS-LEADER PRICING
According to Inc. “Loss-leader pricing is an aggressive pricing strategy in which a
store sells selected goods below cost in order to attract customers who will, according to
the loss-leader philosophy, make up for the losses on highlighted products with additional
purchases of profitable goods.”
ANCHOR PRICING
Anchor Pricing is where you display your “regular” price and then visibly lower the
price of that item in stores or online. It works so well because it helps you to create an
image in shoppers’ minds that they’re getting an incredible deal.
https://sumo.com/stories/how-to-price-a-product
Price anchoring refers to the practice of establishing a price point which
customers can refer to when making decisions. Every time you see a discount with “$100
$75” , the $100 is the price anchor for the $75 sales price.
https://www.priceintelligently.com/blog/bid/181199/price-anchoring-to-optimize-
your-pricing-strategy
Anchor Pricing is the concept of making a product that was first offered seem
cheaper when it put alongside another product.
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

https://blog.pricebeam.com/pricebeams-explanation-of-an-anchor-price
It describes the tendency to rely heavily on the first piece of information offered in
an interaction. This initial information, or anchor, establishes a frame of reference and
decision makers base their decisions around that anchor.
https://www.feedough.com/what-is-price-anchoring-how-it-works/
Price anchors are there to guide your customers to make a purchase decision.
It allows for contrast which people are drawn to as most people are indecisive.
https://loyaltylion.com/blog/price-anchoring-ecommerce
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management STEP 3:
MAKE SURE
YOUR
PRODUCT PRICING DRIVES LONG-TERM BUSINESS PROFIT
To ensure that you maintain long-term product profitability you must analyze your
current business metrics, as well as design a plan to constantly experiment moving forward.

ANALYZING YOUR CURRENT METRICS

The pricing strategies covered above offer good guidance on how to price a
product.
However, the mix of pricing strategies you implement must result in enough income
to cover your overhead expenses, while also leaving you a bit of profit to spark continuous
growth.

Overhead expenses that you should consider include:

Rent Manufacturing costs
Facilities costs
Utilities Staff salary and related costs
Marketing costs
Professional fees, licenses, or permits
Packaging costs
Shipping supply costs
Website maintenance costs
Personal income
Taxes
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

Here are three great ways you can experiment with your pricing:
1. Raise Your Prices On Best-sellers
2. Take Advantage Of Seasonal Discounts Or Promotions
3. Model, Don’t Copy Your Competitors
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

The Rule of 100

 Dr. Jonah Berger, Marketing Professor at the Wharton Business School (University of
Pennsylvania) offers some useful insights on this question in his book Contagious: Why
Things Catch On (Simon & Schuster Publishing, 2013). The book is chockfull of findings from
the behavioral sciences explaining why consumers act as they do – sometimes in ways that
appear on the surface as irrational. One strategy Berger describes is the……

How promotional offers are expressed plays a role in maximizing volume and
profits. Some offers are expressed as cents or dollars off, or absolute discounts (10 cents, $5,
or $50 off). Other offers are expressed as percentage, or relative discounts (5%, 50%, and so
on) off list price. Does the way a promotion is framed (as a money amount or as a
percentage off) affect how big the discount seems, and thus make it more attractive?

https://hamiltoncountybusiness.com/index.php/hamilton-county-business-magazine-columns/32-the-
rule-of-100

 The Rule of 100 says that under 100, percentage discounts seem larger than absolute ones.
But over 100, things reverse. Over 100, absolute discounts seem larger than percentage
ones.

This rule affects whether consumers think something is a good deal, but it also
influences a host of other behaviors related to numerical information. Shrinking the size of
your product? Reporting revenue growth? Representing the difference in percentage versus
absolute terms should affect how big the changes seem. A 2 ounce decrease seems smaller
than a 15% decrease. A 30% increase in revenue seems larger than a $2 million increase.

https://www.thegreatcoursesdaily.com/the-rule-of-100/

 Most people aren’t good at math. Instead of calculating how much money the offer saves
them, they usually go with the feeling. If it feels like a large discount - good. If not, then why
bother counting?

Here’s exactly how to make your discount look good. “The rule of 100” was proposed by
Jonah Berger (2013) in his book Contagious: Why Things Catch On.

https://awario.com/blog/the-psychology-of-pricing-discounts/
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

 The Rule of 100 is all about controlling perception. Research has shown that users can
misattribute a larger numerical value to a larger discount, and favor one discount over
another despite them being mathematically the same.

https://www.widerfunnel.com/blog/using-pricing-psychology/

 The Rule of 100 has been something advertisers and marketers have been using for ages!

Generally, dollars speak volumes –that’s no secret. But when does the $ amount
become too small that it doesn’t sound as significant?

Here’s where the 100 rule comes in, another over $100 stays as a $ sign, and anything
underneath is displayed as a %. The ‘Rule of 100’ has been inside the toolkit of marketers and
retail experts for years, and now you can use it in your own collateral too!

https://www.plannthat.com/how-to-advertise-a-discount/

For Example:
Let’s take this classy handbag and imagine it costs $2000, and you’ve decided to give a discount of $200
OR 10%? 
The rule suggests that because the sales value is over 100, you’d use the dollar figure of $200.

Now let’s apply the discounts and see how much more appealing the $ amount looks?
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

-Yep, we’d definitely be reaching for the $200.

Let’s try advertising a discount that’s UNDER the 100 rule.

Say your product is $80, and you’re going to discount your product by $20.
Although a big discount, the dollar figure falls underneath 100. Let’s see how the rule of 100 works with
this pair of sunglasses.

The rule of 100 tells us that because the saving is under $100, then we should be confident that
the version with the % will be much more effective when you’re working out how to advertise a
discount.

Let’s see how it sounds and looks.

 
 Rizal Technological University
Brgy. Malamig, Boni Avenue Mandaluyong City
College of Business and Entrepreneurial Technology
BSBA Marketing Management

The rule of 100 is a method that is used by businessmen and entrepreneurs to get the interests
of the customers to purchase a product. This method tricks the customers to see the deal of having
discounts on a product a very good deal. The usual way of showing this method is through choosing the
best label for prices.

When giving discounts and the amount deduced from the original price don't exceed 100 pesos
the best way to tell the customers is giving them the percentage instead of the exact amount deduced.
For example a wallet of 150 pesos is being sold with 25% discount. Instead of saying the wallet is 37.5
pesos off, it best to say the wallet is 25% off since the latter would get attention from the customers. On
the other hand, if the deduced amount from the original price exceed 100 pesos. Then the best way is to
tell the exact deduced amount. For example the customer more likely to get satisfied with a 1000 pesos
bag with 250 pesos of than a 1000 pesos bag with 25% discount.

This method somehow manipulate the customers and makes deal looks like very good deal. Also
in this method the business can attack the customer to buy the product and to have a perspective
customer.