Professional Documents
Culture Documents
Pricing
Is governed both by art and science. Requires balancing a multitude of complex forces. Cuts across every aspect of a small company. Is an important signal of a products or services value to customers. Involves both math and psychology.
Copyright 2008 Prentice Hall Publishing Company 2
Price sends important signals to customers quality, prestige, uniqueness, and others. Common small business mistake: Failure to recognize extra value, service, quality, and other benefits they offer and charging prices that are too low. Study: Only 15 percent to 35 percent of customers consider price to be the chief criterion when selecting a product or service.
Copyright 2008 Prentice Hall Publishing Company 3
Must take into account competitors prices but it is not always necessary to match or beat them. Key is to differentiate a companys products and services. Price wars often eradicate companies profits and scar an industry for years. Best strategy: Stay out of a price war!
Copyright 2008 Prentice Hall Publishing Company 4
Focus on Value
The right price for a product or service depends on the value it provides for a customer. Two aspects: Objective value Perceived value
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Acceptable Price Range
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A pricing technique in which the company sets different prices on the same products and services for different customers using the information that a company collects about its customers.
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Pricing Techniques
Odd pricing Price lining Leader pricing Geographical pricing Opportunistic pricing
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Pricing Techniques
Discounts Bundling Optional-product pricing Captive product pricing Byproduct pricing Suggested retail prices
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Example: Dollar Markup = $25 - $15 = $10 Percentage (of Retail Price) Markup = Percentage (of Cost) Markup = $10 $25 $10 $15
= 40%
= 67%
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Consumer Credit
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