Slide 1

*Price

Goals*Identify pricing objectives for a business.

*Calculate the price for products using various methods.

*Discuss factors to consider when pricing services.

*List and describe various pricing techniques.

Slide 2

*Terms

* return on investment* market share* demand-based pricing* cost-based pricing* competition-based pricing* psychological pricing* discount pricing

Slide 3

*Set Pricing Objectives

*price

*the amount a customer pays for a product or service

*needs to be low enough that customers buy from you

*needs to be high enough so revenues exceed expenses

Slide 4

*Objectives might include:*maximize sales*discourage competition*establish an image*increase profits*attract customers

Objectives for a pricing program should be established prior to selecting a pricing strategy.

*Set Pricing Objectives

Slide 5

*Return on Investment

*investment

*the costs of making and marketing a product

*return on investment (ROI)

*amount earned as a result of the investment (usually expressed as a percentage)

Slide 6

*Market Share

*market share

*a business’s percentage of the total sales generated by all companies in the same market

*The total market for a product must be known in order for market share to be determined.

Slide 7

Amount of Sales ÷ Total Market Size

Market Share =

Slide 8

* lowering prices

* advertising and promotion

* networking with potential customers

There are multiple ways to increase market share including:

Slide 9

Why is it important to determine pricing objectives before pricing goods and services?

Slide 10

*Determine a Price for a Product

*There is usually more than one price that can be charged for a product.

Slide 11

*Demand-Based Pricing

*demand-based pricing

*pricing that is determined by how much customers are willing to pay for a product or service

*Survey customers to determine what they would be willing to pay for a product.

*The highest price identified is the maximum price that can be charged.

Slide 12

*Cost-Based Pricing

*cost-based pricing

*determined by using the wholesale cost of an item as the basis for the price charged

*markup price

*determined by adding a percentage amount to the wholesale cost of an item

Slide 13

Wholesale cost × Percentage markup

* Retail Price =

Wholesale cost + Markup amount

Markup amount =

Slide 14

*Competition-Based Pricing

*competition-based pricing

*pricing that is determined by considering what competitors charge for the same good or service

Slide 15

*Price a Service

*To set a price for a service, consider the following:

*the cost of items used in providing the service

*the amount of time required to produce the service

Slide 16

*Time-Based Pricing

*The amount of time it takes to complete a service will be the basis for determining the price of the service.

*Providers must decide whether the cost of materials will be:

*included in the price

*listed as a separate charge

Slide 17

*Bundling

*bundled pricing

*when all services are combined under one charge

Chapter 5 Slide 18

Which method would be the best for a housepainter to use to price services? Why?

Slide 19

*Pricing Techniques

*Pricing can make or break a business.

*Pricing techniques may change over time.

Slide 20

*Introductory Pricing

*price skimming*used for products that are new and unique*a high price is charged to cover product development costs*Price lowers over time

*penetration pricing*a low introductory price is charged to build a strong customer base*discourages competition

Chapter 5 Slide 21

*Psychological Pricing

*psychological pricing

*certain prices have an impact on how customers perceive a product

*used most commonly in retail

Slide 22

*prestige pricing

*a high price to create a feeling of superiority

*odd/even pricing

*prices ending in odd numbers are perceived to be bargains

Techniques used in psychological pricing include the following:

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*for a specific category of products

*offering different prices

*based on specific features and qualities

*promotional pricing

*temporarily offering lower prices to increase sales

*multiple-unit pricing

*pricing items in multiples

*consumers buy more units if they perceive a bargain

price lining