1. Pricing Strategies
Chapter: 11
Lec: 8a

2. New Product Pricing Strategies
Prices change as the product passes through its lifecycle
Market- Skimming Pricing
Market Penetration Pricing

3. New Product Pricing Strategies
Market-skimming pricing
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.
e.g. Sony- latest technologies
e.g. Apple- Ipad
e.g. Mobile phones

4. Apple’s Ipad

5. New Product Pricing Strategies
Market-Penetration Pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share
- highly price sensitive market
- production cost must be low, as large volumes will be produced
e.g. Al-Falah offered credit card with low rates

6. Credit Card

7. Product Mix Pricing Strategies
Product Line Pricing
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices
e.g. ‘Service’ different prices for different shoes
e.g. small medium large size of bottles

8. Product Line Pricing

9. Product Mix Pricing Strategies
Optional product pricing
The pricing of optional or accessory products along with the main product
- Ipod – headphones
- Refrigerator – ice makers 0

10. Optional Product Pricing

11. Product Mix Pricing Strategies
Captive- Product Pricing
Setting a price for products that must be used along with a main product.
- How much to charge for the basic service and how much to charge for the variable usage
e.g. blades for razors (razors cheap, blades expensive)
e.g. film for camera
e.g. entry fee for park- (interesting rides extra ticket)
e.g. Cinema ticket (food items extra from inside)

12. Captive- Product Pricing

13. Product Mix Pricing Strategies
By- Product Pricing
Setting a price for by-products in order to make the main product’s price more competitive

14. Product Mix Pricing Strategies
Product Bundle Pricing
Combining several products and offering the bundle at a reduced price.
e.g. Fast-food restaurant deals
vacation packages

15. Bundle pricing

16. Price Adjustment Strategies
Discount and Allowance Pricing
Discount
A straight reduction in price on purchases during a stated period of time.
- cash discounts e.g. pepsi 5 Rs.
- quantity discount (Thailand)
- Functional Discount (out of season) e.g. airline tickets
e.g. Generation end of summer sale

17. Price Adjustment Strategies
Allowance
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way
-trade in allowance: return an old item to get a new one at a cheaper price
- promotional allowances (PTC on sale of DunHill)