CHAPTER 11: PRICING STRATEGIES

In the marketing mix, this is the second P - Price

I. NEW PRODUCT PRICING STRATEGIES

1. Market-skimming pricing
- 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
- Conditions:
- Having superior product quality and image
- Enough buyers
- Competitors cannot charge lower prices easily

2. Market-penetration pricing
- Market-penetration pricing: setting a low initial price for a new product to attract a large number of
buyers and a large market share
- Conditions
- Market must be highly price sensitive.
- Production and distribution costs must decrease as increasing sales.
- Low prices must help keep out competition and prices must maintain low prices.

II. PRODUCT MIX PRICING STRATEGIES

- Price strategies là long-term incentives còn sales promotion là short-term incentives
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
competitor’s prices.
Set giá khác nhau cho từng sản phẩm trong cái product line
E.g: giá của IP 13 - IP 13 Pro max - IP 13 SE bla bla

Optional-product Pricing of optional or accessory products along with a main product.

pricing Sản phẩm bán kèm cùng sản phẩm chính NHƯNG có hay không đều được
E.g: mua thêm 1 shot cafe, thêm sữa cho cafe; mua máy in rồi mua thêm giấy

Captive-product pricing Setting a price for products that must be used along with a main product.
Set giá cho sản phẩm bán kèm và BUỘC phải đi kèm sản phẩm chính
E.g: mua máy in buộc phải mua thêm mực in mới xài được

By-product pricing The company seeks a market for these by-products to help offset the costs of
disposing of them and help make the price of the main product more competitive.
Sản xuất đường, sẽ có phụ phẩm là bã mía, tái chế bã mía bằng cách bán lại cho
nông dân để nông dân cho bò ăn để phân bón bla bla

Product bundle pricing Combining several products and offering the bundle at a reduced price
Giống kiểu combo: mua combo 1 bánh mì 1 cafe rẻ hơn mua lẻ 2 cái đó

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III. PRICE ADJUSTMENT STRATEGIES
1.Discount and allowance pricing
- Most companies adjust their basic price to reward customers for certain responses, such as paying bills
early, volume purchases, and off-season buying
- Discount:
- Thường là long-term
- Cash discount: a price reduction to buyers who pay their bills promptly. A typical example is
“2/10, n 30,” which means that although payment is due within 30 days, the buyer can deduct 2
percent if the bill is paid within 10 days
- Quantity discount: a price reduction to buyers who buy large volumes
- Functional discount (trade discount): A seller offers to trade-channel members who perform
certain functions, such as selling, storing, and record keeping
- Seasonal discount: price reduction to buyers who buy merchandise or services out of season.
- Allowance: another type of reduction from the list price
- Thường là cho manufacturer và producer
- Trade-in allowances: price reductions given for turning in an old item when buying a new one. It
is most common in the automobile industry, but they are also given for other durable goods
- Promotional allowances: payments or price reductions that reward dealers for participating in
advertising and sales-support programs.

2. Segmented pricing
- Segmented pricing: the company sells a product or service at two or more prices, even though the
difference in prices is not based on differences in costs
- It takes several forms: customer-segment pricing
- Customer-segment pricing: different customers pay different prices for the same product or
service. E.g: giá vé xem phim trẻ em, người lớn, học sinh-sinh viên khác nhau
- Product-form pricing: involves different prices for different versions of the same product. E.g:
giá vé phim 2D khác giá vé phim 3D
- Location-based pricing: involves different prices for different locations. E.g: ghế bình thường,
ghế cặp đôi, ghế nằm bla bla
- Time-based pricing: involves different prices for different moments in time. E.g: giá vé phim
buổi sáng, buổi khuya, trong tuần, cuối tuần, etc.
3. Psychological pricing
- Psychological pricing: pricing that considers the psychology of prices, not simply the economics, the
price says something about the product
- Reference price: prices that buyers carry in their minds and refer to when looking at a given product.
- It might be formed by noting current prices, remembering past prices, or assessing the buying
situation. Sellers can influence or use these consumers’ reference prices when setting prices.

4. Promotional pricing
- Promotional pricing: companies will temporarily price their products below list price, sometimes even
below cost, to create short-run sales
5. Geographical 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: the company sets up two or more zones. All customers within a zone pay the same total
price, the more distant the zone, the higher the price
- Base-point pricing:a pricing strategy in which the seller designates some city as a base point and
charges all customers the freight cost from that city to the customer.
- Freight-absorption pricing: is a strategy in which the seller absorbs all or part of the freight charges to
get the desired business.

6. Dynamic and online pricing

- Dynamic pricing: adjusting pricing continually to meet the characteristics and needs of individual
customers and situations.

7. International pricing
- International pricing: Charging different prices for customers in different countries.
- The price that a company should charge in a specific country depends on many factors, including
economic conditions, competitive situations, laws and regulations, the nature of the wholesaling and
retailing system, and consumer perceptions and preferences.

IV. PRICE CHANGE

1. Initiating price changes
- After setting prices, there are often situations in which companies need to change their prices.
- Sometimes, the company finds it desirable to initiate price cuts or price increases:
Occur due to Buyer reactions Competitors reactions

Price - excess capacity - New models will be - Why did the competitor change
cuts - increased market share available the price?
(giống mục tiêu của - Model are not selling well - Is the price cut permanent or
penetration) - Quality issues temporary?
- Is the company trying to grab
Price - Cost inflation - Product is “hot” market share?
increase - Increased demand - Company greed - Is the company doing poorly and
- Lack of supply trying to increase sales?
- Is it a signal to decrease industry
prices to stimulate demand?

2. Responding to price changes

- There are as many as four responses:
- The firm can reduce its price
- Maintain its price but raise the perceived value of the product
- Improve the quality and increase the price
- Launch a low-price fighter brand to compete with the price change.
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V. PUBLIC POLICY AND PRICING
- In setting prices, companies usually are not free to charge whatever prices they wish. Government, to
what extent, control it
- The major public policy issues in pricing:

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