SPECIAL PRICING STRATEGIES

1. Demand-oriented

2. Cost-oriented

3. Competition-oriented

3 common approaches to help find approximate price level

Skimming – already looked at Penetration – already looked at Prestige Price Lining Odd-even Target Bundle Yield Management

Demand-Oriented

Prestige Pricing

Setting higher-than-average prices to suggest status and high quality to the consumer

Example: Very expensive sports watches, sports equipment, and apparel will be priced well above the average market price to attract consumers who may judge a product’s quality by its price.

Price Lining

Selling all goods in a product line at specific price points.

Example: a business may decide to sell its warm-up suits at three price points: $39.99, $59.99, and $79.99. Makes it easier for customers to make purchasing decisions

Odd-Even Pricing

Pricing goods with either an odd number or even number to match a product’s image

Example: $25.99, suggests a bargain.

Even-priced items reflect a quality item. Thus, more expensive goods are often price with even numbers such a $100.

Target Pricing

Pricing goods according to what the customer is willing to pay.

Manufacturers estimate the target price and then work backwards to determine how much to charge wholesalers and retailers for that item.

Bundle Pricing

Selling several items as a package for a set price

Products purchased individually would cost more than the package price.

Example: Buying team set of basketballs Nintendo DS: Style Boutique

Yield-Management Pricing

Pricing items at different prices to maximize revenue when limited capacity is involved

Example: Seats in a sports arena or stadium are limited by seating capacity. Some seats are priced higher than others due to their locations or the time they are purchased.

Cost-Oriented

Markup Cost-Plus

Markup

Markup pricing is done by adding a percentage of the cost of a product to arrive at the selling price.

Example: Cost $10 Markup 40% of cost = $4 Price to consumer = $14

Cost-Plus Pricing

Pricing products by calculating all costs and expenses and adding desired profit

The cost of making the item or providing the service is determined first.

Example: food-service providers at sporting events determine the salaries of their employees, the cost of food supplies and rent, then they add their intended profit to set the prices to charge for food services.

Competition-Oriented

Loss Leader

Loss Leader Pricing

Offering popular items for sale below cost to attract customers into the store

Their total purchases for the shopping visit will more than cover the money lost on the loss leader.

Example: Movie theatre

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One-Price versus Flexible-Price Policy

One-price Policy

One-price policy is when all the consumers are charged the same price – No Negotiation

Example: when you buy a Wilson Sting tennis racquet from a discount store, you are offered the product at a single price. You can buy it or not, but there is no variation in the price under the seller’s one-price policy.

Flexible Pricing Also referred to as dynamic pricing Customers can negotiate a price. Customers pay different prices for the

same product Example:

Sports Agents or talent agents negotiate the best possible deal for their client.

Sports Agents often go one step further in forms of endorsements (where the real money comes from)

https://www.youtube.com/watch?v=61dIPpRze_o&feature=plcp&list=FLExxEhNWl84KQj8HkVaW6zA

Captive Pricing

Setting a low price for the primary product, but pricing the supplies needed to operate that product high.

Example: Rock band – all sold separately

Supersizing

Increasing the amount of a low cost product and increasing the price by a small amount to encourage customers to buy more

Example: Movie popcorn