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Summary of key points for Chapter 11

Chapter 11 discusses various pricing strategies including dynamic pricing, market skimming, and market penetration, detailing the conditions under which each is effective. It also covers product mix pricing strategies, segmented pricing, psychological pricing, promotional pricing, and other price adjustment strategies. Additionally, the chapter touches on public policy issues in pricing and the importance of maintaining consistent pricing across different channel levels.

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Farhad Ali
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7 views

Summary of key points for Chapter 11

Chapter 11 discusses various pricing strategies including dynamic pricing, market skimming, and market penetration, detailing the conditions under which each is effective. It also covers product mix pricing strategies, segmented pricing, psychological pricing, promotional pricing, and other price adjustment strategies. Additionally, the chapter touches on public policy issues in pricing and the importance of maintaining consistent pricing across different channel levels.

Uploaded by

Farhad Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Pricing Products: Pricing Strategies

Chapter 11

Dynamic Pricing Strategies


New Product Pricing Strategies
Market Skimming - Setting a High Price for a New Product to “Skim” Maximum Revenues from the Target Market.

Use Under These Conditions:


 Product’s Quality and Image Must Support Its Higher Price.
 Costs Can’t be so High that They Cancel the Advantage of Charging More.
 Competitors Shouldn’t be Able to Enter Market Easily and Undercut the High Price.

Market Penetration - Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply.

Use Under These Conditions:


 Market Must be Highly Price-Sensitive so a Low Price Produces More Market Growth.
 Production/ Distribution Costs Must Fall as Sales Volume Increases.
 Must Keep Out Competition & Maintain Its Low Price Position or Benefits May Only be Temporary.

Product Mix-Pricing Strategies: Product Line Pricing


Involves setting price steps between various products in a product line based on:

 Optional-Product - Pricing optional or accessory products sold with the main product.

 Captive-Product - Pricing products that must be used with the main product.

 By-Product - Pricing low-value by-products to get rid of them and make the main product’s price more competitive.

 Product-Bundling - combining several products and offering the bundle at a reduced price.

Discount and Allowance Pricing


Adjusting Basic Price to Reward Customers for Certain Responses

Cash Discount -

Quantity Discount -

Functional Discount -

Seasonal Discount -

Trade-in Allowance -

Promotional Allowance -
Segmented Pricing
Selling Products at Different Prices Even Though There is No Difference in Cost

Customer – Segment -

Product Form -

Location Pricing -

Time Pricing -

Psychological Pricing
 Considers the psychology of prices and not simply the economics.
 Customers use price less when they can judge quality of a product.
 Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a
product.

Psychological Pricing Methods


 Prestige Pricing - setting prices artificially high to evoke an image of prestige or quality

 Odd-Even Pricing - Ending prices with a certain number to influence customers

 Customary Pricing - setting prices on the basis of tradition.

 Price Lining - setting a limited number of prices for selected lines of merchandise.

Promotional Pricing
Temporarily Pricing Products Below List Price to Increase Short-Term Sales Through:

Other Price Adjustment Strategies


- Adjusting Prices to Account for the Geographical Location of Customers.

- Adjusting Prices for International Markets.

Initiating Price Changes


Price Cuts –

Price Increases –

Assessing/Responding to Competitor’s Price Changes (see Fig. 11.1)


Public Policy Issues in Pricing
--

--

Pricing Across Channel Levels


_________________________ - Ensure sellers offer the same price/terms to a given level of trade
________________________ - Manufacturer can’t require dealers to charge a specified retail price for its product
_________________________ - Occurs when a seller states prices or prices savings not available to consumers

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