Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Gilbert A. Churchill, Jr. J. Paul Peter Chapter 13 Pricing Goods and Services Marketing

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Basic Value Positions Slide 13-1 Table 13.1 Price Level High relative to product class Value Position High value because of quality and prestige. Examples Nike athletic shoes (such as Air Jordans); dental work by a widely respected specialist. Keds tennis shoes; dental work by the neighborhood family dentist. High value because of good quality at a reasonable price. High value because of acceptable quality at a low price. Around average for product class Low relative to product class Generic or private-label shoes at a drugstore or discount store; dental work by students being trained at a university clinic.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Slide 13-2 Figure 13.2 Evaluate Customer Response and other Pricing Constraints Set Pricing Objectives Analyze Profit Potential Set Initial Price Make Price Adjustments as Needed The Pricing Process

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Penetration Pricing vs. Price Skimming Slide 13-3 Time $ New Product Pricing Strategies Price Skimming Penetration Pricing

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Pricing Product Lines Slide 13-4 Price Lining Uniform Pricing all books $40.00 all CD’s $15.95 all Cassettes $9.95 $1.00

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Adjusting Prices Slide 13-5a Table 13.2 Discount Quantity discount DefinitionExample Reduction in the price per unit for purchasing a larger quantity Price reduction offered during times of slow demand Percentage reduction from list price offered to resellers A catalog for Gardener’s Supply Company offers 1 cedar planter for $32.95 and 2 or more for $30.00 each. A ski resort offers lower prices during the summer. Seasonal discount Trade discount Cash discount A publisher sells books to a chain of stores for a fraction of the retail price. Incentive for buyers to pay quickly or a lower price for payment of cash An organization receives an invoice that reads, “2/10 net 30.”

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Adjusting Prices Slide 13-5b Table 13.2 Discount Trade-in allowance DefinitionExample Discount for providing a product along with monetary payment Price reduction in exchange for the reseller performing certain promotional activities A car dealer offers $1,000 off the list price in exchange for a buyer trading in her used car. A frozen-pizza maker gives a price break to a supermarket that promises to feature the product in its advertising. Promotional allowance

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Adjusting Prices Slide 13-5c Table 13.2 Product Discount Promotional discount DefinitionExample Short-term discount to stimulate sales or convince buyers to try a product Setting prices near or below cost in order to attract customers to a store A Jiffy Lube franchise passes out flyers offering $5 off on an oil change; the discount is good for 30 days. A supermarket features bananas at 20 cents a pound and Pampers diapers at 50 percent off; the price is below cost, but the store expects buyers to purchase additional items selling at a profit. Loss leader pricing

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Psychological Pricing Slide 13-6 Table 13.3 Table 13.3 missing TYPEDESCRIPTIONEXAMPLE Product Pricing Technique Prestige Pricing DefinitionExample Setting a high price to convey an image of high quality or exclusivity Odd-even pricing Bundle pricing Setting prices a few dollars or cents below a round number Offering several products as a package at a single price The Porsche 911 turbo coupe has a base price of $105,000. Office Depot advertises a GE cellular phone for $ A hotel quotes a rate for an over-night stay that includes breakfast the next morning.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Geographic Pricing Slide 13-7 Geographic PricingPricing a good or service according to where it is delivered. FOB Origin PricingSeller’s price is for the goods at point of shipment, where title passes from buyer to seller. Uniform Delivered PricingSeller’s price includes shipping; title passes where buyer receives the goods. Single-zone PricingPricing in which all buyers pay the same price, including delivery. Multiple-zone pricingPricing in which buyers in different zones pay different delivery prices. FOB with freight allowedPricing in which the seller allows the buyer to deduct shipping costs from the quoted price of the product. Basing point pricingPricing in which the seller charges the quoted price plus the cost of delivering from a basing point where the product is made.