Chapter 3:

PRICING STRATEGIES

Submitted by:
Nicole Ann T. Granada
Daniella O. Lauria
12 – ABM

Submitted to:
Carla Ibe
Principles of Marketing Teacher

February 2020
 Chapter 3:
PRICING STRATEGIES

 MARK-UP PRICING

a pricing strategy that allows a seller fixed markup everytime the product is sold “cost-
plus pricing”
Formula:

FC UC
UC=VC/U+ MUP=
US 1−DMU

WHERE:
UC = Unit Cost
VC/U = Variable Cost per Unit
FC = Fixed Cost
US = Unit Sales
DMU = Desired Markup

EXAMPLE:
GIVEN:
UC = ?
VCU = PHP10.00
FC = PHP300,000.00
US = 50,000 units
DMU = 20%

SOLUITION: SOLUTION
UC MUP
300,000 16
= 10+ =
50,000 1−0.20

= PHP16.00 = PHP20.00
  TARGET RETURN PRICING
a pricing method that allows a product manufacturer to recover a certain portion
of his/her investment every year.
FORMULA:
DR x IC
TRP = UC +
US
WHERE:
UC = Unit Cost
DR = Desired Return
US = Unit Sales
IC = Invested Capital
EXAMPLE:
GIVEN:
UC = PHP16.00
DR = 25%
IC = PHP1,000,000.00
US = 50,000 units

 ODD PRICING
A pricing method premised to the theory that consumers will perceive with odd
price endings as lower in price than they actually are.
“Psychological pricing”

 LOSS LEADER PRICING

Is a pricing strategy where a product is sold at a price below its market cost to
stimulate other sales of more profitable goods or services
Frequently utilized by supermarkets

 PRICE LINING
Designed to simplify consumer's buying decision
 This involves reducing of price points to a little as possible in extreme cases to
only one price point.

 PRESTIGE PRICING
A pricing strategy that disregards the unit cost of a product or service. Instead, it
capitalizes on the high value perception or positive brand reputation of a product or
service.

 MARGINAL PRICING
Where a business organization prices its product at a range below its unit cost but
higher than its unit variable cost.
 PREDATORY PRICING
A pricing strategy where the firm prices its product lower than unit variable cost,
initially resulting in short-term losses.

 GOING RATE PRICING

A pricing strategy where a company prices its product at the same level as or very
close to its competitors prices.

 PROMOTIONAL PRICING
A pricing strategy involving a temporary reduction in the selling price of a
product/service in order to induce trial or to encourage repeat purchase.