Pricing Strategies - Marketing

Minimal Powerpoint
Setting a high price for a new product to skim

maximum revenues layer by layer from the segments
willing to pay the high price.
Minimal Powerpoint
Minimal Powerpoint
Involves setting a low price for a new product to attract a large

number of buyers and a large market share.
Minimal Powerpoint
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.
Setting a price for by-products to make the main product’s price
more competitive.
Setting a price for by-products to make the main product’s price
more competitive.
A straight reduction in price on
purchases during a stated period of
time or of larger quantities.
Promotional money paid buy
manufacturers to retailers in return for
an agreement to feature the
manufacturer’s products in some way.
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Selling a product or service at two or more prices, where the difference in prices is not
based on differences in costs.
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•
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Sellers consider the psychology of
prices, not simply the economics.
REFERENCE PRICES
• Prices that buyers carry in their
minds and refer to when
looking at a given product.
• Might be formed by nothing
current prices, remembering
past prices, or assessing the
buying situitation.
Companies temporarily price their
product their products below list price
and sometimes even below cost to
create buying excitement and urgency.
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Setting prices for customers
located in different parts of the
country or world.
- 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.
in which the company charges the
same price plus freight to all
customers, regardless of their
location .

in which 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.
in which the seller designates
some city as a basing point and
charges all customers the freight
cost from that city to the
customer.

in which the seller absorbs all or
part of the freight charges to get
the desired business.
Adjusting prices continually to meet the characteristics and
need of individual customers and situations.
The price that a company
should charge in as specific
country depends on many
factors, including economic
conditions, competitive
situations, laws and
regulations, and the
development of the
wholesaling and retailing
system .
Is the difference in trading prices from
one period to the next or the difference
between the daily opening and closing
prices of a share of stock.
Companies sometimes initiate price cuts in
a drive to dominate the market through
lower costs. A price-cutting strategy
involves possible traps:
• Low-quality trap: Consumers will assume

that the quality is low.
• Fragile-market-share trap: A low price buys

market share but not market loyalty.The
same customers will shift to any lower-
priced firms that comes along
• Shallow-pockets trap: The higher-priced
competitors may cut their prices and may
have longer staying power because of
deeper cash resources.
Price increase is a source of maximizing the
profit or maintaining it if done carefully.
Also When raising prices, the company
must avoid being perceived
as a price gouger.
Factors leading to price increase
1. Increase in cost inflation.
2.Over Demand
Ways to increase prices

1. Delayed quotation pricing
2. Unbundling
3.Escalator clauses
4. Reduction of discounts
Customers do not always interpret price changes in a
straightforward way. A price increase, which would normally
lower sales, may have some positive meanings for buyers.
Similarly, consumers may view a price cut in several ways.
They often depend on the way of initiating price changes.
Competitors are most likely to react when the number of firms
involved is small, when the product is uniform, and when the
buyers are well informed about products and prices.
How can the firm anticipate the likely reactions of its

competitors?
The firm needs to consider several issues:
Why did the competitor change the price?
Is the price change temporary or permanent?
What will happen to the company’s market share and profits if
it does not respond?
Are other competitors going to respond?
Figure 11.1 shows the ways a company might assess and

respond to a competitor’s price cut.
FIGURE | 11.1
Assessing and Responding
to Competitor Price
Changes
If the company decides that effective action can and should
be taken, it might make any of four responses.
First, it could reduce its price to match the competitor’s
price.
Alternatively, the company might maintain its price but
raise the perceived value of its offer.
Or, the company might improve quality and increase price,
moving its brand into a higher price value position.
Finally, the company might launch a low-price “fighter brand”.
Price competition is a core element of
our free-market economy.
Federal legislation on price-fixing states that
sellers must set prices without talking to
competitors. Otherwise, price collusion is
suspected. Price-fixing is illegal per se—that is,
the government does not accept any excuses
for price-fixing. Companies found guilty of
such practices can receive heavy fines.
Sellers are also prohibited from predatory
pricing – selling below cost with the intention
of punishing a competitor or gaining higher
long-run profits by putting competitors out of
business. This protects small sellers from
larger ones who might sell items below cost
temporarily or in a specific locale to drive
them out of business.
Selling below cost to unload excess inventory is not
considered predatory. Selling below cost to drive
out competitors is. Thus, the same action may or
may not be predatory depending on intent, and
intent can be very difficult to determine or prove.
The seller can also discriminate in its
pricing if the seller manufactures different
qualities of the same product for different
retailers. The seller has to prove that these
differences are proportional.
Laws also prohibit retail (or resale) price
maintenance; a manufacturer cannot
require dealers to charge a specified retail
price for its product.
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Deceptive pricing occurs when a seller states prices or price

savings that mislead consumers or are not actually available
to consumers. This might involve bogus reference or
comparison prices, as when a retailer sets artificially high
“regular” prices and then announces “sale” prices close to its
previous everyday prices.

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Minimal Powerpoint

Setting a high price for a new product to skim

Involves setting a low price for a new product to attract a large

- A geographical pricing strategy

- A geographical pricing strategy

- A geographical pricing strategy

• Low-quality trap: Consumers will assume

• Fragile-market-share trap: A low price buys

Ways to increase prices

How can the firm anticipate the likely reactions of its

Figure 11.1 shows the ways a company might assess and

Deceptive pricing occurs when a seller states prices or price

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