ADM 2320 Lecture Notes - Lecture 10: Coffeehouse, Geographical Pricing, Psychological Pricing
3 May 2018
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Chapter 10
Different Price Perceptions
• No description
• “Arts & Craft” description
• Celebrity user description
Price vs Value
• “A fool knows the price of everything, but knows the value of nothing"
The Value of Coffee
• Commodity: futures of coffee beans
• Package coffee: ground, package, branded
• Prepared coffee: sold in diner, conveniences store
• Coffee experience: consumer in espresso bar, fancy restaurant
The Many Names of Price
• Names of prices
o Tuition: education
o Rent: use of an apartment
o Premium: insurance
o Fees: dental and medical work
o Dues: membership in an organization
o Fare: transportation
o Wage: hourly work
o Interest: use of money over time
• What does it cost
o What are the non-monetary cost: getting a degree, renting an apartment, using a
condom
o Must also consider: operating costs, switching costs, opportunity costs
• Other pricing terms
o Cash discount
o Trade discount
o Promotional allowances
o Promotional pricing
o Psychological pricing
o Bait and swatch
o Uniform deliver prices
o Zone pricing
find more resources at oneclass.com
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Pricing Range
Seeing the Pricing Ceiling
• Received value: consider consumers’ willingness to pay
• for familiar products, consumer have reference prices
o Exist in mind of the customer
o As compared with competitive products and substitutes
o Recent experience dominates
find more resources at oneclass.com
find more resources at oneclass.com
Keep in Mind
• “In any market, some people want to pay more”
• If we choose one price we “leave money on the table"
Pricing Strategies
• Cost based
• Target return
• Demand (profit maximization)
• Metting competition
• Market oriented
• Perceived value
• Other objectives (growth, need, political)
Cost-Based Pricing
• Product -> cost -> price -> value -> customers
Value-Based Pricing
• Product <- cost <- price <- value <- customers
Cost Oriented Pricing
• % markup = about added to cost
selling price
• Selling price = cost x 100
100 - markup amount
• Target return
o Selling price = cost + planned profits
planned number of units to sell
Setting the Pricing Floor
find more resources at oneclass.com
find more resources at oneclass.com
