PRICING IT RIGHT: STRATEGIES, APPLICATIONS AND PITFAILS.

1. OBJECTIVES OF PRICING STRATEGY

1.1. To maximize profits

1.2. To maximize unit sales

1.3. To gain a commanding market share

1.4. To discoverage market entry by competitors

1.5. To create a perception of brand quality or exclusiveness

1.6. To create store traffic by slashing the price of a staple item

1.7. To encourage that purchases

2. PRICE STRATEGIES

2.1. 1. COST-PLUS PRICING: The firm guarantees itself some level of profit. The products price is determinated as follows: PRICE=(Unit variable cost + Unit allocation to fixed costs) * (1 * percent makeup)

2.2. 2. PRICE-SKIMMING: This pricing pattern is common in high-tech consumer products.

2.3. 3. PENETRATION PRICING: Is a strategy that sets the initial price of a product or service lower than supply and demand conditions would dictate.

2.4. 4. PRESTIGE PRICING: Aimst to create a perception of brand quality or exclusivity in the minds of customers by setting a high price.

2.5. 5. BAIT AND HOOK PRICING: This pricing strategy sets the initial purchase price low but charges agressively for replacement parts of other materials consumed in the course of using the product. EX: Gillette.

2.6. 6. PRICE PROMOTIONS: Markets use price promotions special short-term deals temporarily when they: -> Introduce a new product or service -> Want to attract royal users of another brand -> Must clear the distribution channel of excess inventory.

2.7. 7. COMPETITOR PRICING: Rivals have difficulty in competing on price.