PRICING CHAPTER 30 Pricing Strategies WHY DO SO

PRICING – CHAPTER 30 Pricing Strategies WHY DO SO MANY PRICES END IN 99?

Psychological Pricing • Creates an illusion that you are getting a bargain

1. Odd – Even • Odd Number = Bargain • Even Number = Quality • Even Numbers – no cents displayed • Example: $50

2. Prestige • Pricing higher than average to suggest status & prestige

3. Multiple Pricing • 3 items for $. 99 • 10 items for $10

4. Promotional Pricing $847. 99 $647. 99 • Loss leader • Increase sales traffic • Offer popular product for low price • Special Event • Reduced for short period of time • Presidents Day sale

5. Price Lining • Offers all merchandise in a given category at certain prices • Examples:

Discount Pricing • Reductions from usual pricing

1. Cash Discount • Encourages customers to pay bills quickly • Example: 2/10, net 30 days • 2% off total bill if paid within 10 days • Otherwise total bill must be paid within 30 days • Landscaping Company • Total bill = $1, 000 – 3/10, net 30 days • Customer pays the bill within • 10 days • What is the amount the customer owes? • $1, 000 x. 03 = $30 • $1, 000 - $30 = $970

2. Quantity • Place large orders • People usually buy more than planned

3. Seasonal • Buy in advance of buying season • Leftovers – better to sell at a discount than to store items in a warehouse

4. Promotional • Offered to wholesales/retailers what are willing to advertise their products • Example: • Gas Stations