INTRODUCTION

Pricing your product or services may be one of the most stressful parts of owning a business.

finding the right price to attach to a product or service is an art.

Finding the perfect balance is important, but it’s also about knowing how customers view prices, especially prices that end in the number nine.

HOW GOOD ARE YOU?

Yogurt

35-mm Film

Combination TV-DVD Player

$299.99

$8.99

$1.99

WHAT’S THE POINT ??? Consume Have low Pricing

Awareness

Comparison Shop, don’t guess

Bad habits of relying on retailers to tell us prices

TOOLS OF THE TRADE

Sale Signs

Prices ending in “9”

Signpost Items

Pricing Guarantees

SALE SIGNS

Most straightforward of the pricing cues.

Displayed near the discounted item.

Placing the sale sign cost the retailers nothing

Stores make no commitment to a particular level of discount when using the signs

FINDINGS

Using the word “sale” beside a price (without actually varying the price) can increase the demand by 50%

Retailers do not use such signs truthfully. Putting sale signs on more than 30% of the items diminished

the effectiveness of the cue. Placing sale signs on multiple items can increase demand for

those but reduce overall demand. Effective only when placed on few items. Misuse can result in prosecution.

PRICES THAT END IN 9

KNOWN AS Psychological Pricing ,Charm Pricing is a Pricing Strategy based on the theory that certain prices have a psychological impact.

Prices such as $1.99 is associated with spending $1 rather than $2.

Makes items appear cheaper than they really are.

Since people read from left to right, they are more likely to register the first number and make an immediate conclusion as to whether the price is reasonable or not .

EXPERIMENT:WOMEN’S CLOTHING

MIT and the University of Chicago conducted an experiment with prices on women’s clothing.

-They had three basic prices, $34, $39, and $44.

FINDINGS Surprisingly, the $39 item sold the best, even better than the cheaper

price of $34.

One reason is the mind sees the first set of numbers and registers it as priced in the 30-dollar range, even when it’s closer to the 40-dollar range.

Purchasing an item for $39.99 will seem more of a value than purchasing the same item for $40 even.

Changing the price from $34 to $44 yielded no difference.

9 at the end of the price acts the same way as sale sign does

Buyers are more sensitive to price ending than price changes

Retailers reserve prices that end in 9 for discounted items.

Research suggests that prices ending in 9 are less effective when item already has a sale sign.

SIGNPOST ITEMS It is any marketing tactic used to persuade

customers that prices offer good value compared to competitors’ prices, past prices or future prices.

Customers use the prices of signpost items to form an overall impression of a store's prices 

This strategy is used by the retailers by pricing the items lower than the usual price

ADVANTAGES OF SIGNPOST ITEMS

It helps businesses manage and nurture relationships over time.

Use of signpost items is best for small business

DISADVANTAGES OF SIGNPOST ITEMS

Signpost strategy can be used only for the products for which price knowledge is accurate

Customers form impressions about the store

Creates perception that products are underpriced

CUE, PLEASE

Right cue at right place is very important

Apply pricing Cues when customer is less aware of product price and consider employing cues when:

Purchase Infrequently

Customers are new

Design vary over time

Vary seasonally

Vary across stores

QUALITY HAS ITS OWN CUES

Make it "Right today, better tomorrow“

Balance efforts

Installment without financial charges

Concern about Quality

PRICING MATCHING GUARANTEES

Assure the best price for the items that carry exclusive name, own price feature. 

Manufacturer or supplier promises to refund the difference in price

BENEFITS OF PRICE GUARANTEES

 It is the easiest way to attract customers  Pricing is directly related to the revenue

management department   No fear of losing customers to rivals’ price

cuts

DISADVANTAGES OF PRICE GUARANTEES

Price matching guarantees are effective when consumers have poor knowledge

If the guarantee is complicated, customers recognizes that guarantee lacks substance

TRACKING EFFECTIVENESS

•On going measurement of cues are essential part

•Long term impact of the cues must be considered

•As per the study conducted :•First time shoppers who saw deep discount on their first purchase returned more often and purchased more items when they came back and established customers would stock up, returning less often and purchasing fewer items.

If we overlook these long run effects it would set prices too low for establish customers and too high for first time buyers

Keep other departments in mind as using additional sale signs may increase demand within the department but harm demand elsewhere.

Retailer should provide price information as they provide product

Focus on quality as well

Harsh