Setting the Right Price

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Setting the Right Price
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Objectives
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Steps in Setting the Right Price
Estimate demand, costs, and profits
Choose a price strategy
Fine tune with pricing tactics
Results lead to the right price
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Choose a Price Strategy
Price Skimming
Penetration Pricing
Status Quo Pricing
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Price Skimming
Situations When Price Skimming Is Successful
Back
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Penetration Pricing
Situations When Penetration Pricing Is Successful
Back
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Status Quo Pricing
Situations When Status Quo Pricing Is Successful
Back
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Legality and Ethics of Price Strategy
Issues That Limit Pricing Decisions
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Price Discrimination

• Charge different prices to different customers
• Transaction must occur in interstate commerce
• Seller must make two or more sales w/in short
  time period
• Commodities of like grade and quality
• Must be significant competitive injury
• Sellers can argue price variations ?
• Different Costs
• Different Market Conditions
• Competition

Back
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Predatory Pricing

• Charging a very low price for a product with the
  intent of driving competitors out of business.
• Illegal under Sherman and FTC Acts
• Must show ?
• The firm explicitly tried to ruin competitor
• Predatory price was below firms average cost

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Fine Tuning the Base Price
Common Tactics for Fine-Tuningthe Base Price
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Special Pricing Tactics