Chapter 21: Pricing Strategies
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