Identify nine common pricing methods

(1) What steps could a company take to determine the perceived value of its products in its target markets? (2) How can patterns of temporary price discounts “train” consumers to stop buying at full price?

(1) Have you ever bid on anything on eBay, another online auction site, or an in-person auction? If so, how did you decide how much to bid? Did you set a maximum price you’d allow yourself to spend? Did you get caught up in the competitive emotions of bidding against someone else? (2) Have you ever purchased a hot new product as soon as it hit the market, only to see the price drop a few months later? If so, did you resolve never to buy so quickly again?

(1) Cost-based or cost-plus pricing takes the cost of producing and marketing a product and adds a markup to arrive at the selling price. (2) Value-based pricing seeks to establish the perceived value of the product in the eyes of target customers and sets a price based on that. (3) Optimal pricing is a computer-based method that uses sales data to create a demand curve for every product, allowing managers to select prices based on specific marketing objectives. (4) Skim pricing involves setting an initial price that is relatively high in order to capitalize on pent-up demand or the lack of direct competition for a new product. (5) Penetration pricing is setting a price low enough to achieve targeted sales volumes. (6) Loss-leader pricing is setting the price artificially low on one product in order to attract buyers for other products. (7) Auction pricing lets buyers determine the selling price by bidding against one another; in a reverse auction, buyers state a price they are willing to pay and sellers choose whether to match it. (8) Participative pricing lets buyers pay whatever they think a product is worth. (9) Freemium pricing involves giving away products to some customers (as a means of attracting paying customers, for example) or giving away some products but charging for others.