MKT 230 1st Edition Lecture 23 Outline of Last Lecture I. PriceII. DemandIII. Factors Affecting PricingIV. Price DiscriminationOutline of Current Lecture – Chapter 21I. Establishing PricingII. Non-price factors affecting demandIII. Common Pricing StrategiesIV. Psychological Pricing TechniquesCurrent Lecture – Monday, April 27, 2015I. Establishing Pricing- Cost-Based Pricing – adding a dollar amount to the cost of the product- Cost-Plus Pricing – Determine seller’s cost and add specified dollar amount to ito Need to consider competition, fixed and variable costs, and the profit you want to makeo Used when production costs are difficult to predict- Demand-based pricing – customers pay higher price when demand is strong and a lower price when demand is lowo Must be able to calculate how much people will buy at different price pointsII. Non-price factors affecting demand- Marketo Competition and economic conditions- Producto Quality, range, and substitution- SupportThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.o Service and distribution- Competition based pricing – when price is influenced by a competitor’s priceo Importance of this method increases when:1. Competing products are homogeneous2. Organization is serving markets in which price is a key considerationo May necessitate frequent price adjustmentsIII. Common Pricing Strategies- New Product Pricingo Penetration pricing – price a new product so cheap that it will not be profitable for competition to enter the marketo Price skimming – how much can I get for a product while I’ve got the advantage- Differential pricing- Products-line pricing- Psychological pricing- Professional pricing- Promotional pricingo Price leader – offer something below the sale to get you in the storeo Special event pricing – advertised sales to increase sales volumeo Comparison discounting –pricing of a product comparing to competitionIV. Psychological Pricing Techniques – attempt to influence customer’s perception of price to make product’s price more attractive- Reference pricing – position moderately priced items next to more expensive brandsto make them seem lower in price- Bundle Pricing- Every-day low prices- Odd-even pricing – ending the price with a certain number that influences buyer’s perceptions of that priceo Example: ending the price with a .99 instead of making it an even dollar- Customary Pricing- pricing certain goods on the basis of traditiono Example: gas (9/10s of a cent)- Prestige Pricing – setting prices at an artificially high level to convey prestige or high quality- Pricing strategy o Pricing remains flexible and convenient way to adjust the marketing
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