Professional Documents
Culture Documents
MM CH - 14
MM CH - 14
MM CH - 14
Chapter 14
Developing Pricing Strategies
and
Programs
Chapter Questions
1- Reference Prices
Consumers often employ reference prices, comparing an observed
price to an internal reference price they remember.
Box 14.2:
Possible
Consumer
Reference Prices
1- Reference Prices
When consumers think of one or more of these frames of reference,
their perceived price can vary from the stated price.
2- Price-Quality
Inferences
• Image pricing is
especially effective with
ego-sensitive products
such as perfumes and
expensive cars.
2- Price-Quality Inferences
• Some brands adopt exclusivity and
scarcity as a means to signify
uniqueness and justify
premium pricing, e.g. luxury goods.
3- Price Endings
• Many sellers believe prices should end in an odd number.
• Customers see an item priced at US$299 in the $200 rather than
the $300 range.
• Prices that end with 0 and 5 are also common in the marketplace;
they are thought to be easier for consumers to remember.
• ‘Sale’ signs next to prices increase demand, but only if not
overused.
3- Price Endings
Objective
Accumulated Production
Average cost falls with accumulated production experience.
This decline in the average cost with accumulated production
experience is called the experience curve or learning curve.
Target Costing
•Costs can also change as a result of a concentrated effort by
designers, engineers, and purchasing agents to reduce them through
target costing.
•Promotional pricing
•Differentiated pricing
•Price-war trap
Alternative approaches:
• Shrinking the amount of product instead of raising the price.
• Substituting less-expensive materials or ingredients.
• Reducing or removing product features.
• Removing or reducing product services, such as installation or free
delivery.
• Using less-expensive packaging material or larger package sizes.
• Reducing the number of sizes and models offered.
• Creating new economy brands.
Price Changes
Price Changes