1. Setting the Right Price
Lamb, Hair, McDaniel
Chapter 18 Setting the Right Price
CHAPTER 20
Setting the Right Price

2. How to Set a Price on a Product or Service
Chapter 18 Setting the Right Price
Fine tune price with pricing tactics
Choose a price strategy
Estimate demand, costs, and profits
Establish pricing goals
Results lead to the right price

3. Setting the Right Price
Chapter 18 Setting the Right Price
Setting the Right Price
Establish price goals
Low $
High $
Estimate demand, costs, and profits
Choose a price strategy
Skimming
Status quo
Penetration
Fine-tune base price
Evaluate results
Set price $x.yy

4. Establish Pricing Goals
Chapter 18 Setting the Right Price
Profit-Oriented
Sales-Oriented
Status Quo

5. Choose a Price Strategy
Chapter 18 Setting the Right Price
Status Quo Pricing
Price Skimming
Penetration Pricing
Charging a price identical to or very close
to the competition’s price.
A firm charges a high introductory price,
often coupled with heavy promotion.
A firm charges a relatively low price for a
product initially as a way to reach the
mass market.

6. The Legality of Price Strategy
Chapter 18 Setting the Right Price
The Legality of Price Strategy
Unfair Trade Practices
Price Fixing
Price Discrimination
Predatory Pricing

7. Price Discrimination There must be price discrimination.
Chapter 18 Setting the Right Price
Price Discrimination
The Robinson-Patman Act of 1936:
There must be price discrimination.
Transaction must occur in interstate commerce.
Seller must discriminate by price among two or more purchasers.
Products sold must be commodities or tangible goods.
Products sold must be of like grade and quality.
There must be significant competitive injury.

8. Predatory Pricing Predatory Pricing
Chapter 18 Setting the Right Price
Predatory Pricing
Predatory Pricing
The practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market.

9. Tactics for Fine-Tuning the Base Price
Chapter 18 Setting the Right Price
Tactics for Fine-Tuning the Base Price
Special pricing tactics
Discounts
Geographic pricing

10. Discounts, Allowances, Rebates, and Value-Based Pricing
Chapter 18 Setting the Right Price
Discounts, Allowances, Rebates, and Value-Based Pricing
Quantity Discounts
Cash Discounts
Functional Discounts
Seasonal Discounts
Promotional Allowances
Rebates
Zero Percent Financing
Value-Based Pricing

11. Value-Based Pricing
Chapter 18 Setting the Right Price
Setting the price at a level that seems to the customer to be a good price compared to the prices of other options.
Value-Based Pricing

12. Geographic Pricing FOB Origin Pricing Uniform Delivered Zone Pricing
Chapter 18 Setting the Right Price
FOB Origin
Pricing
Uniform
Delivered
Zone Pricing
Freight
Absorption
Basing-Point
The buyer absorbs the freight costs from the shipping point (“free on board”).
The seller pays the freight charges and bills the purchaser an identical, flat freight charge.
The U.S. is divided into zones, and a flat freight rate is charged to
customers in a given zone.
The seller pays for all or part of the freight charges and does not pass them on to the buyer.
The seller designates a location as a basing point and charges all buyers
the freight costs from that point.

13. Other Pricing Tactics Single-Price Tactic
Chapter 18 Setting the Right Price
Single-Price Tactic
All goods offered at the same price
Flexible Pricing
Different customers pay different price
Professional
Services Pricing
Used by professionals with experience,
training or certification
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
Two-Part Pricing
Two separate charges to consume a single good

14. Fine-Tuning the Base Price
Chapter 18 Setting the Right Price
Fine-Tuning the Base Price
Pricing Tactics
Discounts
Geographic
Other Tactics
Consumer Penalties
Quantity • cumulative • noncumulative
FOB origin
Single price
Flexible
Cash
Uniform delivered
Professional services
Functional (trade)
Zone
Price lining
Seasonal
Leader
Promotional (trade)
Freight absorption
Bait
Rebate
Basing- point
Odd–even
0% Financing
Bundling
Value-based
Unbundling
Two-part

15. Pricing During Inflation and Recession
Chapter 18 Setting the Right Price
Pricing During Inflation and Recession
Inflation
Recession
Contract product lines
Value-based
Cost-oriented tactics
Price
Bundling
Delayed- quotation pricing
Unbundling
Escalator pricing
Product
Demand-oriented tactics
New products
Select demand
New product categories
Suppliers
Unique offering
Renegotiate contracts
Change package design
Offer help
Increase buyer dependence
Keep pressure on suppliers
Reduce number of suppliers

16. Ch 20 Discussion Questions
Describe the procedure for setting the right price in marketing.
Explain the four major legal and ethical concerns in pricing decisions.
What is pricing tactics? Explain how discounts, geographic pricing, and other special pricing tactics can be used to fine-tune the base price.
Explain how pricing decisions change during periods of inflation and recession. 16