Chapter 21: Pricing Strategies

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Price Discrimination

Not selling different prices to two or more consumers in relatively close time period.

Flexible Pricing

a price tactic in which different customers pay different prices for essentially the same merchandise brought in equal quantities. Matching another sellers price.

Single Price Tactic

a price tactic that offers all goods and services at the same price

Price Skimming

a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion.

Penetration Pricing

a pricing policy whereby a firm charges a relatively low price for a product when it is first rolled out as a way to reach the mass market.

Price Fixing

an agreement between two or more firms on the price they will charge for a product.

Consumer Penalties

an extra fee paid by the consumer for violating the terms of the purchase agreement

Predatory Pricing

charging a very low price to drive out competition.

Unfair Trade Practices Act

laws that prohibit wholesalers and retailers from selling below cost.

Price bundling

marketing two or more products in a single package for a special price.

Pricing for Inflation

o Cost orientated tactic: Delayed quotation pricing: pricing is not set until the item is either finished or delivered. o Demand orientated tactic: use price to reflect changing patterns of demand caused by inflation or high interest rates. Price shading, the use of discounts by salespeople to increase demand.

Fine Tuning base Price

o Discounts, allowances, and value based pricing.

Geographic Pricing

o FOB origin pricing: makes the buyer absorb the freight costs from the shipping point. o Uniform delivered pricing: a price tactic in which the seller pays the actual freight charges and bills every purchaser an identical flat freight charge. o Zone Pricing: charges customer's different prices based off of given zone o Freight absorption pricing: the seller pays all or part of the actual freight chargers and does not pass them onto the buyer o Base-Point: the seller designates a location as a basing point and charges all buyers the freight cost from that point, regardless of the city from which the goods are shipped.

Pricing Strategies

o Price Skimming: a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion. o Penetration Pricing: a pricing policy whereby a firm charges a relatively low price for a product when it is first rolled out as a way to reach the mass market. o Status Quo Pricing: charging a price identical to or very close to the competitions price.

Pricing Regulations

o Unfair Trade Practices Act: laws that prohibit wholesalers and retailers from selling below cost. o Price Fixing: an agreement between two or more firms on the price they will charge for a product. o Price Discrimination: Not selling different prices to two or more consumers in relatively close time period. o Predatory Pricing: charging a very low price to drive out competition.

Pricing during Recession

o Value based pricing o Bundling or Unbundling

Status Quo Pricing

o charging a price identical to or very close to the competitions price.

Product Line Pricing

setting prices for an entire line of products

Price Lining

the practice of offering a product line with several items at specific price points


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