1 MARKETING CHANNELS Pricing Strategy Berman Chapter 9 Version 3.0

2 A. Introduction B. Price vs Non Price Competition C. Pricing Objectives D. Overall Pricing Strategy E. Cost-Oriented Pricing F. Demand-Oriented Pricing G. Competition-Oriented Pricing H. Integrated Pricing I. Pricing policies J. Gray Markets K. Adapting Price Strategies L. Legal Aspects

3 A. Introduction B. Price vs Non Price Competition

4 C. Objectives –sales based –profit based –gross margin, return on investment –status quo based D. Overall Pricing Strategy –cost approach –demand approach –competition approach

5 E. Cost - Oriented Pricing –markup pricing at retail, at cost –variable markup policies –planned initial markup percent by retailers –direct product profitability winners - dogs, sleepers - traffic builders sources of gross margin data –Robert Morris Associates –Dun and Bradstreet Annual Statement Studies –Progressive Grocer Annual Report small samples, different years and geogs

6 F. Demand-Oriented Pricing –demand minus, chain markups G. Competition-Oriented Pricing –competitive bidding H. Integrated Approach to Pricing Strategy

7 I. Determining Pricing Policies –High, Low Pricing forward buying, trade loading –Every Day Low Pricing EDLP J. Gray Market Goods domestic vs foreign parallel vs diverted –Risks of Gray market free rider phenomenon

8 Strategies to limit gray marketing –Identify firms that have resold to gray resellers –Set quantity discounts schedule and price strategy by market to reduce transshipping –differentiate products sold to different markets –develop customer awareness of risks with transshipped goods –Develop an MIS to monitor above average purchase levels by companies Price Guarantees Selling Against the Brand

9 K. Adapting the Price Strategy –additional discounts, markups L. Legal Aspects of Pricing –resale price maintenance –state sales-below-cost laws –gray market goods –price discrimination Robinson Patman –Discounts and Terms availability rule