1. Managing the Pricing Function
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