1. Chapter 20 Setting the right price

2. Steps in Setting the Right Price
Results lead to the right price
Fine tune with pricing tactics
Choose a price strategy
Estimate demand, costs, and profits
Establish pricing objectives

3. Pricing Strategies Skimming pricing strategy:
the use of a high price relative to competitive offerings.
Skimming

4. Pricing Strategies Skimming Penetration Penetration pricing policy:
the use of relatively low price as compared with competitive offerings
Penetration

6. http://www. marketing-ninja

8. Pricing Strategies Skimming Penetration Status quo
Status quo pricing policy:
the use of relatively similar price as compared with competitive offerings
Penetration
Status quo

9. Tactics for Fine-Tuning the Base Price
Special pricing tactics
Discounts, Allowances, Rebates
Geographic pricing

10. Reductions From List Price
Cash Discounts
Cash discount: price reduction offered to a consumer, industrial user, or marketing intermediary in return for prompt payment of a bill.

11. Reductions From List Price
Cash Discounts
Trade Discounts: payment to a channel member or buyer for performing marketing functions
Trade Discounts

12. Reductions From List Price
Cash Discounts
Quantity discount: price reduction granted for a large-volume purchase.
Sliding scale rebate.
Trade Discounts
Quantity Discounts

13. Three Basic Marketing Price Structures/Services
Challenges:
1. Costs difficult to trace.
2. Labor is more difficult to
price than materials.
3. Costs may not equal the value that customers perceive the services are worth.
Challenges:
1. Small firms may charge too
little to be viable.
2. Prices may not reflect customer value.
Cost-based
Competition-
based
Demand-based/value
Challenges:
1. Monetary price must be adjusted to reflect
the value of non-monetary costs.
2. Information on costs is less available to
customers; hence, price may not be a central factor.

14. Geographic Pricing FOB (free on board) Origin:
Freight Absorption pricing:
Uniform-delivered price:
Zone pricing:
Basing-point system:

15. Zone Pricing

16. Basing-point Pricing $30 freight $20 freight
Seattle customer pays $130
Los Angeles
customer
pays $120
St. Louis plant is
“basing-point”
$100 base price
Chicago customer
pays $110

17. Other Pricing Tactics Single price
Offers all goods/services at the same price
Two part pricing
Charge two separate amounts for 1 product
Price Lining
Several line items at specific price points
Leader Pricing
Sell product at near or below cost
Bait Pricing
Lure customers through false or misleading
price advertising
Odd-Even Pricing
Odd-number prices imply bargain
Even-number prices imply quality
Price Bundling
Combining two or more products in a
single package

18. Summary
Any questions??