Developing Pricing

Strategies and Programs

Consumer Psychology and
Pricing

Reference Pricing

Image Pricing

Price Cues
 Steps in Setting Price
Select the price objective

Determine demand

Estimate costs

Analyzing Competitors’ Price

Select pricing method

Select final price

Step 1: Selecting the Pricing Objective

• Short-term Profit

• Market Penetration

• Market Skimming

• Product-quality
leadership
 Step 2: Determining Demand

Price Elasticity
of Demand
 Price Elasticity of Demand -
Inelastic and Elastic Demand
Step 3: Estimating Costs

Types of Costs

Fixed Cost

Variable Cost

Total / Average Cost

Step 5: Selecting a Pricing Method
• Markup pricing
• Target-return pricing
• Economic-value-to-
consumer pricing
• Competitive pricing
• Auction-type pricing
English
Dutch
Sealed-bid
 Step 6: Selecting the Final Price

• Price Discrimination

• Product-mix Pricing
Price Discrimination

• Customer-segment
pricing
• Product-form pricing
• Channel pricing
• Location pricing
• Time pricing
 Product-Mix Pricing

• Loss-Leader Pricing
• Optional-feature Pricing
• Captive Pricing
• Two-part Pricing
• By-product Pricing
• Product-bundling Pricing
Selecting Consumer Incentive - Consumer

• Price Reductions
• Coupons
• Cash Refunds
• Price Packs
• Premiums
• Frequency Programs
• Prizes
• Tie-in Promotions
• Seasonal Discounts
• Financing
Selecting Consumer Incentive - Trade

• Allowances
• Free Goods
• Price-off
• Payment Discount