Professional Documents
Culture Documents
Topic Outline
• What Is Price?
• Customer Perceptions
of Value
• Company and Product
Costs
• Pricing Strategies
What Is a Price?
Types of costs
Fixed costs are the costs that do not vary with production
or sales level
• Rent
• Interest
• Executive salaries
Company and Product Costs
Variable costs are the costs that vary with the level of
production
• Packaging
• Raw materials
Company and Product Costs
Total costs are the sum of the fixed and variable costs for
any given level of production
Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors.
Premium pricing is often most effective in the early days of a product’s life
cycle. Because customers need to perceive products as being worth the
higher price tag, a business must work hard to create a value perception
Common Pricing Strategies
Market-penetration pricing
Market-penetration pricing sets a low initial price in order to penetrate the
market quickly and deeply to attract a large number of buyers. While
many new companies use this technique to draw attention away from
their competition, penetration pricing does tend to result in an initial loss
of income for the business. Over time, however, the increase in
awareness can drive profits and help small businesses to stand out from
the crowd.
Common Pricing Strategies
Economy Pricing
Price Skimming
Designed to help businesses maximize sales revenue on new products and
services, price skimming involves setting rates high during the introductory
phase. The company then lowers prices gradually as competitor goods appear
on the market. One of the benefits of price skimming is that Competitors
should not be able to enter the market easily.
Common Pricing Strategies
Psychology Pricing
Psychology pricing refers to techniques that marketers use to encourage
customers to respond on emotional levels rather than logical ones. The
goal of psychology pricing is to increase demand by creating an illusion of
enhanced value for the consumer.
Common Pricing Strategies
Bundle Pricing
With bundle pricing, small businesses sell multiple products for a lower rate
than consumers would face if they purchased each item individually. Bundling
goods is not only an effective way of moving unsold items that are taking up
space in your facility, but it can also increase the value perception in the eyes
of your customers, since you’re essentially giving them something for free.
Thank you