Preview

Ch. 11 Marketing

Satisfactory Essays
Open Document
Open Document
515 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
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

You May Also Find These Documents Helpful

  • Better Essays

    MKT 650

    • 4716 Words
    • 19 Pages

    In the first stage, the introductory stage, mentions by the text book that “a new product’s purchase is limited because members of the stage market are insufficiently aware of its existence; also the product often lacks easy availability” (Mullins & Walker, 2010, p271). The company should shorten the product line to reduce production costs and hold down inventories, and because the pricing is affected by many factors, companies usually use skimming and penetration pricing strategies for their new products. Skimming is “designed to obtain as much margin per unit as possible” (Mullins & Walker, 2010, p272), which means setting a high price for the product in the beginning of the product life cycle. It allows the company to recover investment of the…

    • 4716 Words
    • 19 Pages
    Better Essays
  • Good Essays

    p1 unit 9 business

    • 980 Words
    • 4 Pages

    Sales promotions- sales promotions are when an organisation uses things such as deals such as BOGOF (buy one get one free)…

    • 980 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    7. A sales discount represents a reduction, not in the selling price of a product or service, but in the amount to be paid by a credit customer if payment is made within a specified period of time.…

    • 14932 Words
    • 105 Pages
    Powerful Essays
  • Satisfactory Essays

    Assignment 8

    • 637 Words
    • 3 Pages

    1. Firms sometimes set a low price in a new product-market (penetration pricing) to discourage potential competitors from entering the market. Can you identify a circumstance where a company might deliberately want to attract competitors to a new market and set a high price to help accomplish such an objective?…

    • 637 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    *predatory pricing: the or acting of selling a product or service at a very low price, intending to drive competitors out of the market…

    • 2303 Words
    • 10 Pages
    Good Essays
  • Satisfactory Essays

    Eurodisney Business Case

    • 1332 Words
    • 6 Pages

    * Penetration Pricing: Setting prices assuming that demand will increase with lower prices and decrease with higher prices and therefore there are limitations on your profit margin. Elastic demand curve assumption.…

    • 1332 Words
    • 6 Pages
    Satisfactory Essays
  • Good Essays

    Depreciation and Value

    • 1733 Words
    • 7 Pages

    * Trade discounts are payments to distribution channel members for performing some function. For example if Sara had a warehouse, stocked my goods in…

    • 1733 Words
    • 7 Pages
    Good Essays
  • Powerful Essays

    inventories by buying back unsold units, then the retailer’s promotional incentives are dulled. Under very…

    • 11778 Words
    • 85 Pages
    Powerful Essays
  • Powerful Essays

    Sales Promation

    • 2438 Words
    • 10 Pages

    Sales promotions are short-term incentives to encourage the purchase or sale of a product or service.…

    • 2438 Words
    • 10 Pages
    Powerful Essays
  • Good Essays

    A key to a marketer’s setting a final price for a product is to find an approximate price level to use as a reasonable starting point. There are four common approaches to helping find this approximate price level. A. Demand-Oriented Pricing Approaches Demand-oriented approaches weigh factors underlying expected customer tastes and preferences more heavily than such factors as cost, profit, and competition when selecting a price level. 1. Skimming Pricing. a. A firm introducing a new or innovative product can use skimming pricing, setting the highest initial price that customers really desiring the product are willing to pay. • These customers are not very price sensitive. They weigh the new product’s price, and quality against the same characteristics of substitutes.…

    • 7407 Words
    • 30 Pages
    Good Essays
  • Good Essays

    Flahavans

    • 834 Words
    • 3 Pages

    Flahavan’s product pricing mirrors the market-share leadership objective. They set their prices relatively low as possible because they believe that they will enjoy maximised profits by having the largest market share.…

    • 834 Words
    • 3 Pages
    Good Essays
  • Better Essays

    These promotional pricing techniques are used mainly by small-scale B2B vendors to increase the perceived value of their product/ services in the minds of the…

    • 2913 Words
    • 12 Pages
    Better Essays
  • Better Essays

    By 2001, pioneers in LCD television market have decided to use a pure skimming pricing strategy, which involves charging a relatively high price for a short time (Investopedia, 2013). This strategy is usually employed when a new, innovative product is launch onto the market. At that time, LCD television market was considered as an oligopoly – only three companies were competing in the market (Hitachi, Philips, and Sony). Pioneers benefited from an inelasticity of demand and were able to “skim off” customers who were willing to pay premium price to have to product sooner, therefore, benefit from high short-term profit due to the newness of the flat LCD television. By setting up high prices initially, pioneers could build a strong high-quality reputation. Furthermore, this strategy allowed the firm to reduce prices when new competitor entered the market. By contrast, setting up low initial prices would be difficult to increase without damaging sales.…

    • 1088 Words
    • 5 Pages
    Better Essays
  • Better Essays

    Management Properties

    • 1246 Words
    • 5 Pages

    Penetrating pricing isn’t new to the retail marketing at all. This has been a technique that which has been used by several different firms’ amongst the years of operation. This technique is a means to offer goods and or services at a much lower rate than its competitors to grow and to establish a customer base as a firm’s foundation for now and the future (Griffin, 2013). The pricing of goods and or services stays at a low for a length period of time in order to find the reviews of customers to ensure the demand and desire of these goods and or services and once that is recognized then the prices will rise and the wholesaler and the customers can begin in negotiating a higher price with its newly established customer base. Penetrating pricing also known as the hook and bait strategy has different strategies in doing so.…

    • 1246 Words
    • 5 Pages
    Better Essays
  • Satisfactory Essays

    Tourism

    • 514 Words
    • 3 Pages

    1. Product quality 2. Product distinctiveness 3. Extent of the competition 4. Method of distribution 5. Character of the market 6. Cost of the product and service 7. Cost of distribution 8. Margin of profit desired 9. Seasonality 10. Special promotional prices 11. Psychological considerations…

    • 514 Words
    • 3 Pages
    Satisfactory Essays

Related Topics