Entrepreneurship

Mr. Bernstein

Pricing Strategy, pp 230-247

October 2015

2

Factors Affecting PriceCosts – Fixed or VariableSupply and DemandConsumer PerceptionsCompetitionWhat are your objectives?

Return on InvestmentGaining Market ShareCash Flow / Survival

EntrepreneurshipMr. Bernstein

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Pricing Strategy ApproachesCost-Based Pricing

Cost plus markupDemand-Based Pricing

“What the market will bear”Competition-Based Pricing

“Price Takers”Flexible or One-Price PolicyWhat approach(es) would you use? Why?

EntrepreneurshipMr. Bernstein

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Pricing TechniquesPsychological pricing:

Prestige pricingOdd/even pricingPromotional pricingMultiple Unit discountsBundle pricingPrice lining

What are examples of each?

EntrepreneurshipMr. Bernstein

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Analyzing PricingBreak-even Analysis: Number of units that must be

sold to cover fixed costs

Fixed Costs / (Unit Selling Price – Variable Costs) = Break-Even Point

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Analyzing PricingMarkup: Amount added to the cost of an item

Cost + Markup = PriceMarkup / Cost = Percentage Markup

AKA “Gross Margin”; doesn’t include overhead costs

EntrepreneurshipMr. Bernstein

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How often should pricing be revised?Elastic demand – revise oftenDo you compete primarily on price, service or

quality?

EntrepreneurshipMr. Bernstein