Chapter 7 - Pricing Strategies and Chapter 7 - Pricing Strategies and Policies Policies

Market skimmingMarket skimming - setting an - setting an initially high price for a product initially high price for a product before competitors enter the before competitors enter the market.market.Penetration PricingPenetration Pricing - setting a - setting a low price when a product is low price when a product is introduced to help it compete in introduced to help it compete in an established market.an established market.Competitive PricingCompetitive Pricing - products - products in a particular category match or in a particular category match or follow the price of their follow the price of their competitors very closely.competitors very closely.

Pricing PoliciesPricing Policies

Leader PricingLeader Pricing - this is used to generate traffic in the store and encourage shoppers to purchase - this is used to generate traffic in the store and encourage shoppers to purchase other products.other products.Price LiningPrice Lining - this puts all the products that are one price in one place. Signs are usually placed to - this puts all the products that are one price in one place. Signs are usually placed to show that all items are a certain price on that rack.show that all items are a certain price on that rack.Everyday low priceEveryday low price - used in some discount stores like Walmart or Zellers as part of their image. - used in some discount stores like Walmart or Zellers as part of their image.Super SizingSuper Sizing - adding a low cost to a product to increase its selling price and profitability. The - adding a low cost to a product to increase its selling price and profitability. The products usually cost little to make, so selling a super size at a higher cost is very profitable.products usually cost little to make, so selling a super size at a higher cost is very profitable.Theres also:Theres also:

Negotiated PricingNegotiated Pricing - the buyer makes an offer to purchase - like in real estate or ebay. - the buyer makes an offer to purchase - like in real estate or ebay.Interest-Free PricingInterest-Free Pricing - this is the don't pay a cent kind of pricing. The consumer must have - this is the don't pay a cent kind of pricing. The consumer must have approved credit to participate in this.approved credit to participate in this.Combo PricingCombo Pricing - also known as bundling. This is used for food, in combo meals or electronics when - also known as bundling. This is used for food, in combo meals or electronics when they are extra features like software.they are extra features like software.Psychological PricingPsychological Pricing - charging a price that is perceived to be better, like ending all prices with .99 - charging a price that is perceived to be better, like ending all prices with .99 or .88or .88

Purchase DiscountsPurchase Discounts - when better prices are given for large volume orders or for paying early. - when better prices are given for large volume orders or for paying early.

Additional Factors Affecting Price Additional Factors Affecting Price

LawsLaws - price fixing, bait and switch, double ticketing are all illegal in Canada - price fixing, bait and switch, double ticketing are all illegal in CanadaMarketing BoardsMarketing Boards - they often set the price for the product that their member - they often set the price for the product that their member sell, such as eggs or dairy. All members of the Board pay into a fund that sell, such as eggs or dairy. All members of the Board pay into a fund that provides marketing activities such as advertising or home mailings like provides marketing activities such as advertising or home mailings like cookbooks. Prices are set to protect all members from competing on the basis cookbooks. Prices are set to protect all members from competing on the basis of price and to allow competition with foreign imports.of price and to allow competition with foreign imports.Product PositioningProduct Positioning - what image does the manufacturer want for its product? - what image does the manufacturer want for its product? Premium pricing, discount pricing or anything in between.Premium pricing, discount pricing or anything in between.Consumer DemandConsumer Demand - A long as the consumer is willing to pay the price, the - A long as the consumer is willing to pay the price, the manufacturer can charge it. This works well when there is little manufacturer can charge it. This works well when there is little competitioncompetition between manufacturers.between manufacturers.

Using the example of a t-shirt manufacturing plant:Using the example of a t-shirt manufacturing plant:Variable costsVariable costs - are most often dependent on the quantity of goods sold. ex - - are most often dependent on the quantity of goods sold. ex - the amount of fabric, the cost of labour required for the manufacturing, the cost the amount of fabric, the cost of labour required for the manufacturing, the cost of utilities.of utilities.Fixed costsFixed costs - are constant, independent of sales or other variables. ex - the - are constant, independent of sales or other variables. ex - the pattern, the machine, the basic facility for production, insurance pattern, the machine, the basic facility for production, insurance

BY Justin Stroud BY Justin Stroud and Curtis Smithand Curtis Smith