1 Markup method based on cost:

Selling price *(1+markup)= 2$*(1+0.25)=$2.50

2Nd markup method based on selling price:

Selling price /(1-.25)= $2/(1-0.25)=$2.67

• calculate the unit contribution

• new product pricing strategies (price skimming, penetration pricing)

Price skimming – charging the highest possible price that buyers who most desire the product will pay.

Penetration pricing – setting prices below those of competing brands to penetrate a market and gain a significant market share quickly.

• product line pricing (price lining, captive pricing, bait pricing, premium pricing)

Price lining – setting a limited number of prices for selected groups or lines of merchandise.

Captive pricing – pricing the basic product in a produce line low while pricing related items at a higher level.

Bait pricing – pricing an item in the product line low with the intention of selling a higher-priced item in the line.

Premium pricing – pricing the highest-quality or most versatile products higher than other models in the product line.

• psychological pricing (reference pricing, bundle pricing, optional product pricing, multiple-unit pricing, EDLP, odd-pricing, customary pricing, prestige pricing)

Reference pricing – pricing a product at a moderate level and displaying it next to a more expensive model or brand.

Bundle pricing – packaging together two or more complimentary products and selling them for a single price. (meal)

Optional product pricing –

Multiple unit pricing-packaging together two or more identical products and selling them for a single price. (Chips, soft drinks, bulbs)

EDLP-everyday low price, setting a low price for product a consistent basis.

Odd-pricing- ending the price with certain numbers to influence buyers’ perceptions of the price or product.

Customary pricing- pricing on the basis of tradition.

Prestige pricing- setting prices at an artificially high level to convey prestige or a quality image.

• promotional pricing (price leader, special-event pricing, comparison discount)

Price leader – pricing a few products below the usual markup, near cost, or below cost.

Special-event pricing – advertised sales or price cutting linked to a holiday, season, or event.

Comparison discount- setting a price at a specific level and comparing it with a higher price.

• how do alternative marketing objectives (survival, market share, etc.) affect pricing strategy

Pricing objectives – goals that describe what a firm wants to achieve through pricing.

Survival – adjust price levels so that the firm can increase sales volume to match organizations expenses.

Profit – identify price levels that enable the firm to maximize profit.

Return on investment- identify price levels that enable the firm to yield targeted return on investment.

Market share- adjust price levels so that the firm can maintain or increase sales relative to competitors’ sales.

Cash flow- set price levels to encourage rapid sales.

Status quo – identify price levels that help stabilize demand and sales.

Product quality – set prices to recover research and development expenditures and establish a high-quality image.