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Directions – Fill in the blank with the type of pricing that best fits the situation.

  1. Many home phone, cell phone, cable and satellite providers offer a discounted rate for a period of time, such as your first six months of service, to get you to switch to their service. After your discount period has ended, the price increases significantly, but the company hopes you have become used to its service and won't go through the trouble to change to a different company. This is called pricing
  1. A product priced at $299.95 may be perceived as offering more value than a product priced at $300.00. Many times a buyer will pass along the price as being lower than it is either because they recall it being lower than the even number or they want to impress others with their success in obtaining a good value. This is known as pricing.
  2. Many retailers use pricing such as Walgreens and Meijer set item prices on a based on target margins, or in other words their cost plus a markup in price. This retail practice is simply a matter of time saving since it would be difficult operationally to set individual market prices for thousands of specific items.
  1. If a t-shirt seller determines that his costs for each t-shirt sold are $4 for raw materials, and $8 for labor, his variable costs total $12. If he wants to achieve a 10 percent markup on each t-shirt, he would sell each t-shirt for $13.20 ($12 + $1.20). This is known as .
  2. Discount stores such as Wal-Mart use pricing in two ways. First, they offer new products through their stores at prices much lower than other stores, hoping that you will buy more than that one product once you come in the store. They are willing to lose money on the new product as a way to get more customers through the door.
  1. I know if I buy a ticket from New York to Detroit at least two months in advance I can get a round-trip ticket for around $100. If I buy same ticket between 21 to 30 days prior to the flight it will easily cost double that amount. If I get outside the 14 day window it might be $250. At the very last minute it might be back around $200 or just under, but it will never again be the super low price that I would have paid for planning in advance. This is called pricing.
  1. Handy Appliance Company feels that there is a market niche for a hand mixer with certain new features. Surveying the features and prices of hand mixers already in the market, the marketing department believes that a price of $30 would be what customers are willing to pay. At that price, marketing estimates that 40,000 of new mixers could be sold annually. To design, develop, and produce these new mixers, an investment of $2,000,000 would be required. The company desires a 15% return on investment (ROI). Given these data, the to manufacture, sell, distribute, and service one mixer is $22.50.
  1. When Sony introduced the world's first high definition television to the Japanese market in 1990, the high-tech sets cost $43,000. These televisions were purchased only by customer who could afford to pay a high price for the new technology. Sony rapidly reduced the price over the next several years to attract new buyers. By 1993, a 28-inch HDTV cost a Japanese buyer just over $6,000. In 2001, a Japanese consumer could buy a 40-inch HDTV for about $2000, a price that many more customers could afford. In this way, Sony uses pricing to get the maximum amount of revenue from the various segments of the market.
  1. Toyota surpassed GM in 2005 as the largest auto manufacturer in the world. It has been reported that Toyota's approach to entering the U.S. market was first to be steadfast in achieving a certain net profit margin. Second, they determined what price they had to offer in order to get Americans to buy their small import instead of more well-known domestic cars. Third, since the difference was the cost of the car they could offer, Toyota designed the solution accordingly. This is known as .
  1. An example of pricing is DVD players. Initially in 1990s when DVD players were launched the price of a DVD player was $500 and $400. By 2001 the prices were dropped to less than a $100. By 2004 DVD players were available for as low as $50 or $60.
  1. A few examples of companies which partake in premium pricing in the marketplace include Rolexand Bentley. People will buy a priced product because they believe the high price is an indication of good quality and to be a sign of self-worth.
  1. Meijer has many products that are the actual “Meijer” brand. Much of the time, these products are kept at very low prices, lower than competitors. However, Meijer does not spend a lot on advertising these products. Much of the advertising comes from customers seeing these particular products on shelves next to the name brands. The pricing strategy that is used by Meijer for their own products is called pricing.