OE 6 Compare various pricing strategies and explain

OE 6: Compare various pricing strategies and explain the goals of pricing How much will I charge for MILK? q Eagle Challenge q Review of Pricing LT: Define and explain Pricing Strategies

Discount pricing involves the seller's offering reductions from the usual price. They include: = cash = quantity = trade = seasonal discounts = promotional discounts and allowances KOSSA Standard OE 6: Compare various pricing strategies and explain the goals of pricing

Cash discounts are offered to buyers to encourage them to pay their bills quickly. Quantity discounts are offered to buyers for placing large orders. = Noncumulative quantity discounts are offered on one order. = Cumulative quantity discounts are offered on all orders over a specified period of time. KOSSA Standard OE 6: Compare various pricing strategies and explain the goals of pricing

KOSSA Standard OE 6: Compare various pricing strategies and explain the goals of pricing Seasonal discounts are offered to buyers willing to buy at a time outside the customary buying season. Promotional discounts are offered to wholesalers and retailers willing to advertise or promote a manufacturer's products. Allowances are granted to customers for selling back an old model.

Differentiated Pricing • Customer-segment pricing • Product-form pricing • Image pricing • Channel pricing • Location pricing • Time pricing • Yield pricing KOSSA Standard OE 6: Compare various pricing strategies and explain the goals of pricing

Predatory pricing: Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business KOSSA Standard OE 6: Compare various pricing strategies and explain the goals of pricing

KOSSA Standard OE 6: Compare various pricing strategies and explain the goals of pricing These are the six steps in determining a price for an item: 1. Determine pricing objectives. 2. Study costs. 3. Estimate demand. 4. Study competition. 5. Decide on a pricing strategy. 6. Set price.

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Government Regulations Affecting Price Federal and state governments have enacted laws regarding: = price fixing = price discrimination = resale price maintenance = minimum pricing = unit pricing = price advertising 9

Government Regulations Affecting Price fixing occurs when competitors agree on certain price ranges within which they set their own prices. Price discrimination occurs when a firm charges different prices to similar customers in similar situations. 10

Government Regulations Affecting Price Resale price maintenance occurs when a manufacturer forces retailers to sell an item at a minimum price. Minimum price laws prevent retailers from selling goods below cost plus a percentage for expenses and profit. Some states do not have minimum price laws and allow loss leaders, items sold at cost to attract customers. 11

Government Regulations Affecting Price Unit pricing allows consumers to compare prices in relation to a standard unit or measure, such as an ounce or a pound. The Federal Trade Commission (FTC) price advertising guidelines forbid fraudulent and misleading pricing advertisements. 12

Pricing Strategies Captive product pricing involves products that must be used along with the main product Optional product pricing takes into account optional or accessory products along with the main product 11 -8