Ch. 11 Marketing
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
* 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