The Price Strategy

1. The Price Strategy

2. Factors Affecting Price • Costs and Expenses • Supply and Demand • Consumer Perceptions • Competition • Government Regulations • Technological Trends

3. Pricing Objectives • Obtaining a Target Return-on-Investment • Obtaining Market Share • Other Objectives • Social and Ethical Considerations • Establishing an Image • Meeting the Competition’s Prices

4. Adjusting Prices to Maximize Profit • Are your products elastic or inelastic? • Elastic = small change in price, great change in demand • Inelastic = change in price, no effect on demand • What are your competitors prices? • Relate to competitors price properly

5. Basic Price Strategies • Cost-Based – Adding a mark-up to turn a profit • Demand-Based – Charge what customers are willing to pay. Inelastic demand is necessary. • Competition-Based – Price below, in-line, or above the competition.

6. Pricing Policies • Flexible Price – Allow customers to haggle over price • One-Price – Customers are treated equally.

7. The Product Life Cycle • Introduction • Growth • Maturity • Decline

8. Pricing Techniques • Psychological • Prestige Pricing • Odd/Even Pricing • Price Lining • Promotional Pricing • Discount Pricing • Cash discounts • Quantity discounts • Trade discounts • Promotional discounts • Seasonal discounts

9. Break-Even Analysis Fixed Expenses _________________ = Breakeven Point Unit Sales – Variable Expenses

10. Revising Prices • MarkUp • Cost + Markup = Price • MarkDown • Price x Markdown % = Markdown

11. Reacting to Market Prices • Prices fall = Lower your price • Prices rise = Raise your price • Special Market Circumstances • National convention • Emergencies/Natural Disasters • Require a balance between responsibility to your business and social responsibility