Ch. 11 Marketing

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Ch. 11 – Pricing Strategies

* New-Product Pricing Strategies
* Product Mix Pricing Strategies
* Price Adjustment Strategies
* Price Changes
* Public Policy and Marketing

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. * Product quality and image must support the price

* Buyers must want the product at the price
* Costs of producing the product in small volume should not cancel the advantages of higher prices * Competitors

Market-penetration pricing: Setting a low price for a new product to attract a large number of buyers and a large market share. * Price sensitive market
* Inverse relationship of production and distribution cost to sales growth * Low prices must keep competition out of the market

Product Mix Pricing Strategies

Product Line Pricing: takes into account the cost differences between products in the line, customer evaluation of their features, and competitors’ prices.

Optional-product pricing: takes into account optional or accessory products along with the main product.

Captive-product pricing: involves products that must be used along with the main product.

By-product pricing: refers to products with little or no value produced as a result of the main product. Producers will seek little or no profit other than the cost to cover storage and delivery.

Product bundle pricing: combines several products at a reduce price.

Price-Adjustments Strategies

Discount and allowance pricing: reduces prices to reward customer responses such as paying early or promoting the product. * Discounts: A straight reduction in price on purchases during a stated period of time or of larger quantities. * Allowances: Promotional money paid by manufacturers to retailers in return for an agreement to...
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