Pricing

Strategies:
Additional
consideration
Chapter 11
 Definitions

Market-Skimming
Pricing
▪ Setting a high price
for a new product to
skim maximum
revenues layer by
layer from segments
willing to pay the
high price.
11- 1
 Definitions

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.

11- 2
 Product Mix
Pricing Strategies

Product Line Pricing

▪ Setting price steps between
product line items.
❖ Price points

11- 3
 Product Mix
Pricing Strategies

Optional-Product Pricing
▪ Pricing optional or
accessory products sold
with the main product
▪ Supplemental software,
digital cameras, and
printers sold with a new
PC are examples

11- 4
 Product Mix
Pricing Strategies

Captive-Product Pricing
▪ Pricing products that must
be used with the main
product
❖ High margins are often
set for supplies
▪ Services: two-part pricing
strategy
❖ Fixed fee plus a
variable usage rate

11- 5
 Product Mix
Pricing Strategies

By-Product
Pricing
▪ Pricing of
low-value
by-products
to get rid of
them

11- 6
 Product Mix
Pricing Strategies

Product Bundle
Pricing
▪ Pricing bundles of
products sold
together
▪ Common in fast
food industry

11- 7
Price Adjustment Strategies

Strategies Types of discounts

▪ Cash discount
Discount / ▪ Quantity discount
allowance ▪ Functional (trade)
discount
Segmented
▪ Seasonal discount
Psychological
Allowances
Promotional
▪ Trade-in allowances
Geographical ▪ Promotional
International allowances
11- 8
Price Adjustment Strategies

Strategies Types of segmented

pricing strategies:
▪ Customer-segment
Discount / ▪ Product-form pricing
allowance ▪ Location pricing
▪ Time pricing
Segmented Also called revenue or
Psychological yield management
Certain conditions
Promotional must exist for
Geographical segmented pricing to
be effective
International
11- 9
Price Adjustment Strategies

Strategies The price is used to

say something about
the product.
Discount / ▪ Price-quality relationship
allowance ▪ Reference prices
Segmented ▪ Differences as small as
five cents can be
Psychological important
Promotional ▪ Numeric digits may have
symbolic and visual
Geographical qualities that
psychologically
International influence the buyer
11- 10
Price Adjustment Strategies

Strategies Temporarily pricing

products below the list
price or even below
Discount / cost
allowance Loss leaders
▪ Special-event pricing
Segmented ▪ Cash rebates
Psychological ▪ Low-interest financing,
longer warranties, free
Promotional maintenance

Geographical Promotional pricing

can have adverse
International effects
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Price Adjustment Strategies

Strategies Types of
geographic pricing
Discount / strategies:
allowance ▪ FOB-origin pricing
Segmented ▪ Uniform-delivered
pricing
Psychological
▪ Zone pricing
Promotional ▪ Basing-point pricing
Geographical ▪ Freight-absorption
International pricing
11- 12
Price Adjustment Strategies

Strategies Prices charged in a

specific country
depend on many
Discount / factors
allowance ▪ Economic conditions
Segmented ▪ Competitive situation
▪ Laws / regulations
Psychological ▪ Distribution system
Promotional ▪ Consumer perceptions
▪ Cost considerations
Geographical
International
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