Chapter 11 - Pricing Strategies
Optional-Product Pricing
The pricing of optional or accessory products along with a main product.
PRICE CHANGES
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PUBLIC POLICY AND PRICING
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FOB-Origin Pricing
A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.
Uniform-Delivered Pricing
A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.
Zone Pricing
A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant zone, the higher price.
Freight-Absorption Pricing
A geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business.
Basing-Point Pricing
A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.
Discount
A straight reduction in price on purchases during a stated period of time or in larger quantities.
Dynamic Pricing
Adjusting prices continually to meet the characteristics and need of individual customers and situations.
Product Bundle Pricing
Combining several products and offering the bundle at a reduced price.
PRICE ADJUSTMENT STRATEGIES
Discount and allowance pricing Segment pricing Psychological pricing Promotional pricing Geographical pricing Dynamic pricing International pricing
Assessing and Responding to Competitor Price Changes
If competitor cut prices, but won't negatively affect market share or profits, then hold current price and continue to monitor them. If the competitor cut prices and it would affect you market share or profits, either reduce price, raise perceived value, improve quality and increase price, launch a low-price "fighter brand."
Allowance
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.
NEW-PRODUCT PRICING STRATEGIES
Market-skimming pricing and market penetration pricing
Reference Prices
Prices that buyers carry in their minds and refer to when they look at a given product.
Psychological Pricing
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product.
PRODUCT MIX PRICING STRATEGIES
Product line pricing Optional product pricing Captive product pricing By-product pricing Product bundle pricing
Price Gouger
Raising prices rapidly, enriching the company at the customer's expense.
Price Fixing (collusion)
Sellers setting prices with competitors.
Segmented Pricing
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. Customer Segment- normal, student, senior pricing Product Form- airline tickets round trip vs one way Location Based- concert ticket seating Time Based- seasonal pricing
Predatory Pricing
Selling below cost with the intention of pushing others out of business, then raising prices up again.
Market-Skimming Pricing (Price Skimming)
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. Ex. iPhone, Xbox
Market-Penetration Pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
By-Product Pricing
Setting a price for a by-product in order to make the main product's price more competitive.
Captive-Product Pricing
Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console.
Geographical Pricing
Setting prices for customers located in different parts of the country or world.
Product Line Pricing
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices.