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Chapter 14

Chapter 14. Managing the Pricing Function. What kind of pricing decisions do you think went into the introduction of the product shown in this commercial?. Pricing Strategies. Skimming pricing strategy Often used by marketers of high-end products

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Chapter 14

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  1. Chapter 14 Managing the Pricing Function

  2. What kind of pricing decisions do you think went into the introduction of the product shown in this commercial?

  3. Pricing Strategies • Skimming pricing strategy • Often used by marketers of high-end products • Also by firms introducing a distinctive product with little or no competition • Allows firms to control demand during the introductory stages

  4. Weber • Distinctive Grills Marketed through a Skimming Pricing Strategy

  5. Lincoln Navigator • Maintaining a High Price in Periods of High Demand

  6. Price Reductions to Increase Market Share

  7. What pricing recommendation would you have for Ruffles if they had a strategic goal of acquiring a greater market share.

  8. Penetration pricing strategy • Designed to generate many trial purchases

  9. Everyday low pricing (EDLP • Wal-Mart has successfully utilized an EDLP strategy

  10. Southwest Airlines Often enters new markets with low penetration prices and maintains market share with everyday low pricing strategy

  11. Competitive Pricing Strategy • Firms focus their own marketing efforts on the product, distribution and promotion elements of the marketing mix

  12. Lendingtree.Com Practices a Competitive Pricing Strategy

  13. Class Discussion Does Cartier Use a Skimming, Penetration, or Competitive Pricing Strategy?

  14. Price Quotations • List prices: Established prices normally quoted to potential buyers • The take on a $25 T-Shirt

  15. Market price: Price that an intermediary or final consumer pays for a product after subtracting any discounts, rebates, or allowances from the list price • Kraft offering a rebate promotion

  16. Reductions from List Price • Cash discount: price reduction offered to a consumer, industrial user, or marketing intermediary in return for prompt payment of a bill • 2/10 net 30

  17. Quantity discount: price reduction granted for a large-volume purchase • Large orders reduce selling expenses, storage, and transportation costs • Cumulative quantity discounts • Non-cumulative quantity discounts

  18. Allowances • Trade-in • Promotional • Rebates: refund for a portion of the purchase price, usually granted by the product’s manufacturer

  19. Geographic Considerations • FOB (free on board) plant or FOB origin • Freight absorption • Uniform-delivered price • Zone pricing

  20. Pricing Policies • Pricing policy • Psychological pricing

  21. Odd pricing • For example, this John Deere at $1,999 instead of $2000

  22. Unit pricing: pricing policy in which prices are stated in terms of a recognized unit of measurement or a standard numerical count Nextel Seeks to Gain a Competitive Advantage by Using Seconds Instead of Minutes in It’s Unit Pricing Policy

  23. Price Flexibility: pricing policy that permits variable prices for goods and services

  24. Product-line pricing • Hallmark has different prices for its card lines

  25. Purina Puppy Chow is Only One of Purina’s Product Lines – Each of Which is Priced Differently

  26. Shell Oil Practices Product Line Pricing by Offering Several Different Gasoline Products and Price Ranges

  27. Promotional pricing • “Buy one, get one free” is a common pricing promotion

  28. Loss leader Freeinternet.Com’s Price (Free) Is a Loss Leader. This Price Is Meant to Attract Customers in the Hope That They Will Buy Merchandise From the Many Firm’s on the Site

  29. Price-Quality Relationships • Without other cues, price serves as an important indicator of a product’s quality to buyers

  30. Competitive Bidding and Negotiated Prices • Many purchases are made through competitive bidding, a process in which potential suppliers and manufacturers are invited to quote prices on proposed purchases or contracts • Negotiated Prices Online

  31. RealEstate.Com Is an Example of Negotiated Prices Online

  32. Online Auctions: Purest form of negotiated pricing

  33. Traditional Global Pricing Strategies • Standard Worldwide • Dual Pricing • Market Differentiated

  34. Characteristics Of Online Pricing • Cannibalization • Shopping Bots • Bundle pricing

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