The Price StrategyChapter 11

Factors Affecting Price• Costs and Expenses• Supply and Demand• Consumer Perceptions• Competition• Government Regulations• Technological Trends

Pricing Objectives

• Goals that tell what a marketer wants to achieve through pricing.

Return on Marketing Investment (ROMI)

• Ratio that tells a business how much it earned as a percentage of the investment it made to earn the money.

Price-Fixing• Situation in which a group of competitors gets

together and sets (fixes) the price for a specific product; they then all agree to sell that product for the same price.

Price Discrimination• Situation in which a company plays favorites

by charging lower prices to some companies for the same products.

Price Channels

B2B B2B B2C

Manufacturer WholesalerRetailer Consumer

Pricing Techniques

Psychological Pricing

• Set of pricing techniques used to create an image of a product to entice customers to buy.

Discount Pricing• Business that sell to other businesses often

use discount pricing.• Discount pricing offers a reduction from the

regular or list price of a product.

Cash Discount

• A reduction in price is offered to retailers who pay their bills promptly. (B2B)

Promotional Pricing

• A discount is given in exchange for the customers promoting the product. (B2B)

Quantity Discountor Bundle Pricing

• A discount is given for a large order. (B2B)

Prestige Pricing

• A technique used in which higher-than-average prices are used to suggest status and prestige to the customer.

Seasonal Discount

• A discount is given when a retailer buys in advance of the season. (B2B)

Calculating Prices

List Price• Established price of a product as published in

a catalog or on a price tag.

Market Price• Actual price you pay for a product, after any

discounts or coupons are deducted.

MSRP• The retail price that the manufacturer

recommends.

Unit Pricing

• Displaying the price of an item based on a standard unit of measure, such as an ounce or a pound.