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Pricing Strategies

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Jesca Savista

on 22 May 2015

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Transcript of Pricing Strategies

Pricing Strategies
Major Pricing Strategies
Our Team!
Group 4

Thi Chi Kim Nguyen (Kim)
Yingying Xu (Aki)
Jesca Savista (Ocha)
Pricing Strategies
Major pricing strategies
New product pricing strategies
Price Adjustment strategies
Product mix pricing strategies
Cost-Based Pricing
Value-Based Pricing
Competition-Based Pricing
New Product Pricing Strategies
Market Skimming
Price-Adjustment Strategy
Discount And Allowance Pricing
Cash discount
Quantity discount
Functional discount
Seasonal discount
Segmented Pricing
Psychological Pricing
Promotional Pricing
Geographical Pricing
International Pricing
Product-Mix Pricing Strategy
Product-Line Pricing
Optional Product Pricing
Captive Product Pricing
By Product Pricing
Product Bundle Pricing
Q & A
Setting a high price
Results in fewer, but more profitable sales
May reduce price later
High profit margin
Cost recovery
Dealer profits
Quality image
Sales volume
Consumer acceptance
Annoyed customers
Cost inefficiency
Market Penetration
Setting a low price
Attract a large number of buyers quickly & win a larger market share
Adoption & Diffusion
Not much competition in the initial phase
Cost efficiency
Competitors are kept at bay
The customer expects the prices remain low for a long term
Penetration pricing cannot create strong customer relationship
Multiple products
To maximise the sales of different products
Offer optional products with the main product
Captive products must be used with the base product.
Raw products with no value
Combine several products
Offer the bundle at a reduced price
Market Skimming Use Under These Conditions
Product's quality & image support its high price
Market not price sensitive
Cost of producing small volumes can't be so high
Competitors shouldn't be able to enter market easily & undercut the high price
What king of pricing strategy does Wal-Mart use?
Market Penetration Use Under These Conditions
Market is large & highly price-sensitive
Production & distribution costs must fall as sales volume increase
Low price can effectively keep out competition & low price position can be maintained.
Which pricing strategy does Apple use?
Cost-Plus pricing
Break-Even pricing
simplest pricing method
Adds a fixed amount or percentage of profit to the product cost
Unit cost = $2.45
Mark-up = 70%
Selling price = $4.20
What the customer will pay
The value that a product or service delivers to customers

2015 Ford Mustang Convertible
2012 Ford Focus Trend
Comparing product's price and value to competitors

Market leader
Market follower
Internal and External Considerations
Internal factors
Overall marketing strategies, objectives and marketing mix
Other organisational considerations
External Factors
Market and demand
Other external factors
Difference between Cost-based & Value-based Pricing
Major pricing strategies
New product pricing strategies
Price Adjustment strategies
Product mix pricing strategies
Draganska M, Jain, DC 2006, ‘Consumer Preferences and Product-Line Pricing Strategies: An Empirical Analysis’, Marketing Science, Vol. 25, No. 2, pp.164 – 173
Simonin, BL, Ruth, JA 1995, ‘Bundling as a Strategy for New Product Introduction: Effects on Consumers’ Reservation Prices for the Bundle, the New Product, and Its Tie-in’, Journal of Business Research, Vol. 33, pp. 219 – 230
Tutorsonnet, Penetration Pricing, viewed 21 May 2015,http://www.tutorsonnet.com/advantages-of-penetration-pricing-homework-help.php

What Is Product Bundle Pricing (Definition & Examples), viewed 14 May 2015,<http://www.psychologicalpricing.net/product-bundle-pricing-definition-examples/>
Design a product -> determine product costs -> set price based on cost -> convince buyers of the product's value
Assess customer needs and value perceptions -> set target price to match customer perceived value -> determine costs that can be incurred -> design product to deliver desired value at target price
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