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Chapter 11 - Coggle Diagram
Chapter 11
Price adjustment strategies
Promotional pricing
Temporarily reducing prices to spur short-run sales
Special-event pricing
Limited-time offers
Discount
companies must be careful to balance short-term sales incentives against long-term brand building
Geographical pricing
Adjusting prices to account for the geographic location of customers
Zone pricing
Base-point pricing A
Uniform-delivered pricing
Freight-absorption pricing
FOB-origin pricing
Psychological pricing
Adjusting prices for psychological effect
Reference prices
Dynamic pricing
Adjusting prices continually to meet the characteristics and needs of individual customers and situations
can trigger margin-eroding price wars and damage customer relationships and trust
can help sellers to optimize sales and serve customers better
Segmented pricing
Adjusting prices to allow for differences in customers, products or locations
location-based pricing
time-based pricing
customer-segment pricing
International pricing
Adjusting prices for international markets
depends on
economic conditions
competitive situations
laws and regulations
nature of the wholesaling and retailing system
consumer perceptions and preferences
Discount and allowance
pricing
Reducing prices to reward customer responses
Product mix pricing strategies
Captive-product pricing
Producers of the main products often price them low and set high mark-ups on the supplies
captive-product costs might make others
avoid buying the device in the first place
cause discomfort during use after purchase
Setting a price for products that must be used along with a main product
In the case of services, captive-product pricing is called two-part pricing
fixed fee
variable usage rate
By-product pricing
help offset the costs of disposing of them
help make the main product’s price more competitive
Setting a price for by-products
Optional-product pricing
The pricing of optional or accessory products along with a main product
Companies must decide which items to include in the base price and which to offer as options
Product bundle pricing
Combining several products and offering the bundle at a reduced price.
promote the sales of products consumers might not otherwise buy
Product line pricing
Setting the price steps between various products in a product line
based on
customer evaluations of different features
competitors’ prices
cost differences between the products
New product pricing strategies
Market-skimming pricing
set high initial prices to skim revenues layer by layer from the market.
only under certain conditions
the product’s quality and image must support its higher price
the costs of producing a smaller volume cannot be too high.
The product is difficult to imitate
Market-penetration pricing
set a low initial price to penetrate the market quickly and deeply
under certain conditions
the market must be highly price sensitive
production and distribution costs must decrease as sales volume increases
keep out the competition and the penetration pricer must maintain
Price changes
Initiating price changes
Initiating price cuts
boost sales and market share
dominate the market through lower costs
Initiating price increases
improve profits
over-demand
Buyer reactions to price changes
price increase
lower sales, may have some meanings for buyers
products are more exclusive or better made
company is being greedy by raising prices and making customers suffer
a price cut
getting a better deal on an exclusive product.
quality had been reduced, and the brand’s
luxury image might be tarnished
Competitor reactions to price changes
must assess each competitor’s likely reaction
all competitors behave alike
analyse only a typical competitor
competitors do not behave alike
separate analyses
Responding to price changes
consider several issues
Why did the competitor change the price?
Is the price change temporary or permanent?
What will happen to the company’s market share
and profits if it does not respond?
Are other competitors going to respond?