Pricing
iPad Mini $329+
• Kindle Fire
• Nexus 7
• Both $199
What is Price?
• What is given up for the product
• The only P that directly generates revenue
• Price can be an indicator
– Value
– Quality
Things to consider…
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Competition
Costs
Company objectives
Customers
Channel members
Company PRICE objectives
• Profit Oriented
– Profit Maximization
– Satisfactory Profits
– Target ROI
• Sales Oriented
– Market Share
– Sales Maximization
Company PRICE Objectives
• Competitor Oriented
– Parity
– Status quo
• Customer Oriented
– Value for a specific TM
How Customers influence price
• Demand
• Supply
Price Equilibrium
However…..
• Supply and demand analysis
– Don’t account for marketing
– Or branding
– Or differing curves
• Luxury goods, where higher price leads to higher
demand
Still on Customers influence
• Elasticity of demand
– Elastic
– Inelastic
• What influences elasticity
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Income/Purchasing power
Substitutes
Durability
Other uses
Cross-price elasticity
• Complimentary products
Costs
• Variable
• Fixed
• Total
Break Even Analysis
• The point at which your profit is neither
negative or positive
• FC/CPU
Competition
• Monopoly  ONE firm
– Cable, FPL
• Oligopoly  Handful of firms
– Airlines
• Monopolistic Competition  many firms,
differentiated products, different prices
– Most common
• Pure Competition  many firms, commodities,
same prices
– Wheat
Other influences on Price
• Internet
– Shopping bots
– Auctions
• Stage in PLC
• Distribution Strategy – match of YOURS with
the CHANNEL
Pricing Strategy
• Price Skimming
• Penetration Pricing
• Status Quo
Price Skimming
Penetration Pricing
Unfair Practices
• Price Fixing/Collusion
• Discrimination (only for products)
• Predatory Pricing
– Charge low to kill competition
Other common Tactics
• Odd/Even pricing
– $99.95
• Price Bundling
• Two Part pricing
– Air Ticket, baggage fee, meal and seat