1st part of 11 chapter

8/14/2019 1st Part of 11 Chapter

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PricingPricing

StrategiesStrategies

Chapter 1Chapter 111


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Definitions

Market-Skimming PricingMarket-Skimming Pricing Setting a high priceSetting a high price

for a new product tofor a new product to

skim maximumskim maximum

revenues layer byrevenues layer bylayer from segmentslayer from segments

willing to pay thewilling to pay the

high price.high price.


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Definitions

Market-Penetration PricingMarket-Penetration Pricing

Setting a low priceSetting a low price

for a new productfor a new product

in order to attractin order to attract

a large number ofa large number ofbuyers and a largebuyers and a large

market share.market share.


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Product Line PricingProduct Line Pricing Setting price steps betweenSetting price steps between

product line items.product line items.

Price pointsPrice points

Product Mix

Pricing Strategies


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Optional-Product PricingOptional-Product Pricing

Pricing optional orPricing optional or

accessory products soldaccessory products sold

with the main productwith the main product

Supplemental software,Supplemental software,

digital cameras, anddigital cameras, and

printers sold with a newprinters sold with a new

PC are examplesPC are examples

Product Mix

Pricing Strategies


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Captive-Product PricingCaptive-Product Pricing Pricing products that mustPricing products that must

be used with the mainbe used with the main

productproduct

High margins are oftenHigh margins are often

set for suppliesset for supplies

Services: two-part pricingServices: two-part pricing

strategystrategy

Fixed fee plus aFixed fee plus a

variable usage ratevariable usage rate

Product Mix

Pricing Strategies


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By-ProductBy-ProductPricingPricing

Pricing ofPricing of

low-valuelow-value

by-productsby-products

to get rid ofto get rid of

themthem

Product Mix

Pricing Strategies


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Product BundleProduct Bundle

PricingPricing

Pricing bundles ofPricing bundles of

products soldproducts sold

togethertogether Common in fastCommon in fast

food industryfood industry

Product Mix

Pricing Strategies


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Price Adjustment Strategies

Types of discountsTypes of discounts

Cash discountCash discount

Quantity discountQuantity discount Functional (trade)Functional (trade)

discountdiscount

Seasonal discountSeasonal discount

AllowancesAllowances Trade-in allowancesTrade-in allowances

PromotionalPromotional

allowancesallowances

Discount /Discount /allowanceallowance

SegmentedSegmented

PsychologicalPsychologicalPromotionalPromotional

GeographicalGeographical

InternationalInternational



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Types of segmentedTypes of segmentedpricing strategies:pricing strategies: Customer-segmentCustomer-segment

Product-form pricingProduct-form pricing Location pricingLocation pricing

Time pricingTime pricing

Also called revenue orAlso called revenue or

yield managementyield managementCertain conditionsCertain conditionsmust exist formust exist forsegmented pricing tosegmented pricing tobe effectivebe effective


SegmentedSegmented






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The price is used to sayThe price is used to say

something about thesomething about the

product.product.

Price-quality relationshipPrice-quality relationship Reference pricesReference prices

Differences as small as fiveDifferences as small as five

cents can be importantcents can be important

Numeric digits may haveNumeric digits may have

symbolic and visual qualitiessymbolic and visual qualitiesthat psychologically influencethat psychologically influence

the buyerthe buyer


SegmentedSegmented






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Temporarily pricingTemporarily pricingproducts below the listproducts below the listprice or even belowprice or even below

costcostLoss leadersLoss leaders Special-event pricingSpecial-event pricing

Cash rebatesCash rebates

Low-interest financing,Low-interest financing,longer warranties, freelonger warranties, freemaintenancemaintenance

Promotional pricingPromotional pricingcan have adversecan have adverse

effectseffects


SegmentedSegmented






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Types of geographicTypes of geographic

pricing strategies:pricing strategies:

FOB-origin pricingFOB-origin pricing Uniform-deliveredUniform-delivered

pricingpricing

Zone pricingZone pricing

Basing-point pricingBasing-point pricing

Freight-absorptionFreight-absorption

pricingpricing


SegmentedSegmented






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Prices charged in aPrices charged in a

specific countryspecific country

depend on manydepend on many

factorsfactors Economic conditionsEconomic conditions

Competitive situationCompetitive situation

Laws / regulationsLaws / regulations

Distribution systemDistribution system

Consumer perceptionsConsumer perceptions

Cost considerationsCost considerations


SegmentedSegmented





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