PRICE-ADAPTATION

AND ADJUSTMENTS
Marketing Management
 Adapting the Price

How should a company adapt prices to meet

varying circumstances and opportunities

 They develop a pricing structure that

reflects variations in geographical demand
and costs, market-segment requirements,
purchase timing, order levels, delivery
frequency, guarantees, service contracts, and
other factors.
 Resulting to not realizing same profit from
each unit of product it sells due to discounts,
allowances and promotional support.

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PRICE-ADAPTATION STRATEGIES

 Geographical Pricing

 Price Discounts and Allowances

 Promotional Pricing

 Discrimanatory Pricing
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PRICE-ADAPTATION STRATEGIES
 Geographical Pricing
Pricing products to different customers in different locations and countries

Pricing considerations:
• Transportation or shipping costs
• Consumption levels of the consumers
• Price sensitivity of the consumers
• Presence of competitors
• Exchange rates
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PRICE-ADAPTATION STRATEGIES
 Pricing Discounts and Allowances
 Adjusting list price and give discounts and allowances to make it more
affordable to the consumers or competitive in the market.
• Cash Discount - price reduction to buyers who pay bills promptly.
• Quantity Discount - price reduction to those who buy large volumes.
• Seasonal Discount - price reduction to those who buy merchandise or services out
of season.
• Allowance - extra payment designed to gain reseller participation in special
programs.
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PRICE-ADAPTATION STRATEGIES
 Promotional Discounts
 Temporary reduction of price for a specific amount of time.
• Loss-leader pricing – Supermarket and department stores drop the price on well-
known brands to stimulate additional store traffic.
• Special event pricing - special prices in certain seasons.
• Special customer pricing - offer special prices exclusively to certain customers.
• Cash rebates – certain amount is refunded to customers who buy merchandise
from retailers within a specified time without cutting list price.

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PRICE-ADAPTATION STRATEGIES
 Promotional Discounts
 Other promotional strategies
• Low-interest financing
• Longer payment terms
• Warranties and service contracts

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PRICE-ADAPTATION STRATEGIES
 Discriminatory Pricing
 Basic price is adjusted to accommodate differences among customers,
products, locations, and other characteristics.
• Customer-segment pricing - Different customer groups pay different prices for the
same product or service
• Product-form pricing - Different versions of the product are priced differently but
not in proportion to their cost
• Channel pricing – A product is differently priced depending on where it
purchased
• Time pricing – Price vary by season, day or hour
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Adjusting the Price

Initiating and Responding to

Price Changes

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 PRICE CUTS

• Excess plant capacity

• Dominate the market
Price-cutting strategy can lead to:
• Low-quality trap - Consumers will assume
quality is low
• Fragile-market-share trap – low price buys
market share but not market loyalty
• Shallow-pockets trap - Higher-priced
competitors match the lower prices but have
longer staying power because of deeper cash
reserves
• Price-war trap - Competitors respond by
lowering their prices even more, triggering a
price war
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 PRICE INCREASES

• Inflation
• Overdemand
Ways of increasing price:
• Delayed quotation pricing – final price not set
until finished or delivered.
• Escalator clause – today’s price plus all or
part of any inflation increases up to delivery
• Unbundling – separating one or more elements

Successful price increase can raise profits

considerably.

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Responding to Competitors’ Price Changes

Consider the product’s stage in the life cycle, its importance in the company’s portfolio, the
competitor’s intentions and resources, the market’s price and quality sensitivity, the behavior of
costs with volume, and the company’s alternative opportunities.
Possible actions:

 Reduction in Price
 Increase the Perceived Value
 Improve Quality and Increase Price
 Launch a Low-Price Product
When facing a competitor’s price change, the firm must try to understand the competitor’s intent
and the likely duration of the change. A market leader pressured by lower priced competitors can
seek to better differentiate itself, introduce its own low-cost competitor, or transform itself more 12
completely.
THANK YOU!