Pricing Strategies
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Pricing Strategies

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Pricing Strategies Presentation Transcript

  • 1. Chapter 18 Setting the Right Price
  • 2. Chapter 18 Objectives 1. Describe the procedure for setting the right price. 2. Identify the legal and ethical constraints on pricing decisions. 3. Explain how discounts, geographic pricing, and other special pricing tactics can be used to fine tune the base price.
  • 3. Steps in Setting the Right Price Establish pricing goals Estimate demand, costs, and profits Choose a price strategy Fine tune with pricing tactics Results lead to the right price
  • 4. Choose a Price Strategy Price Skimming Basic Strategies for Penetration Pricing Setting Prices Status Quo Pricing
  • 5. Legality and Ethics of Price Strategy Price Fixing Price Discrimination Issues That Limit Pricing Decisions Predatory Pricing
  • 6. Predatory Pricing  Charging a very low price for a product with the intent of driving competitors out of business.  Illegal under Sherman and FTC Acts  A defendant must show   The firm explicitly tried to ruin competitor  Predatory price was below firm’s average cost
  • 7. Fine Tuning the Base Price Quantity Discounts Cash Discounts Functional Discounts Seasonal Discounts Common Promotional Allowances Tactics for Rebates Fine-Tuning the Base Price Value-Based Pricing
  • 8. Geographic Pricing FOB Pricing Uniform Delivered Common Pricing Methods of Geographic Pricing Zone Pricing Basing-Point Pricing
  • 9. Special Pricing Tactics Single-Price Tactic All goods at the same price Flexible Pricing Different customers pay different price Professional Used by professionals with experience, Services Pricing training or certification Price Lining Several line items at specific price points Loss Leader Pricing Sell product at near or below cost Lure customers through false or misleading Bait Pricing price advertising Odd-number prices imply bargain Odd-Even Pricing Even-number prices imply quality Combining two or more products in a Price Bundling single package Two-Part Pricing Two separate charges to consume a single good
  • 10. Pricing During Difficult Economic Times Value Pricing Recession Pricing Tactics Bundling or Unbundling
  • 11. Supplier Strategies during Recession Renegotiating contracts Cost-Saving Offering help Strategies with Suppliers Keeping the pressure on Paring down suppliers