In this chapter, we examine some additional pricing considerations and approaches. Companies today face a fierce and fast-changing pricing environment. Value-seeking customers have put increased pricing pressure on many companies. Thanks to economic woes in recent years, the pricing power of the Internet, and value-driven retailers such as Walmart, today’s more frugal consumers are pursuing spend-less strategies. In response, it seems that almost every company has been looking for ways to cut prices. | LECTURE 17 Pricing Strategies Copyright 2012 Pearson Education Inc. 1- 1- 11 Publishing as Prentice Hall Topic Outline New-Product Pricing Strategies Product Mix Pricing Strategies Price Adjustment Strategies Price Changes Public Policy and Marketing Copyright 2012 Pearson Education Inc. 1- 2 Publishing as Prentice Hall New-Product Pricing Market-skimming pricing is a strategy with Strategies high initial prices to skim revenue layers from the market 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 advantage of higher prices Competitors should not be able to enter the market easily Copyright 2012 Pearson Education Inc. 1- 3 Publishing as Prentice Hall New-Product Pricing Strategies Market-penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share Price sensitive market Inverse relationship of production and distribution cost to sales growth Low prices must keep competition out of the market Copyright 2012 Pearson Education Inc. 1- 4 Publishing as Prentice Hall Product Mix Pricing Strategies Copyright 2012 Pearson Education Inc. 1- 5 Publishing as Prentice Hall 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 Copyright 2012 Pearson Education Inc. 1- 6 Publishing as Prentice Hall Product Mix Pricing Strategies 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 Copyright 2012 Pearson Education and Inc. delivery.
