In this chapter you will: Understand how pricing objectives should guide strategic planning for pricing decisions; understand choices the marketing manager must make about price flexibility and price levels over the product life cycle; understand the many possible variations of a price structure, including discounts, allowances, and who pays transportation costs;...
Chapter 17: Pricing Objectives and Policies For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Strategic Planning for Price Target Market Product Place Promotion Price Pricing objectives Price flexibility Price levels over product life cycle Discounts and allowances— to whom and when Geographic terms— who pays transportation and how Exhibit 171 172 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Pricing Objectives Profit Oriented Pricing Objectives Sales Oriented Status Quo Oriented Exhibit 174 173 Target Return Maximize Profits Dollar or Unit Sales Growth Growth in Market Share Meeting Competition Nonprice Competition For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Price Flexibility Policies Oneprice policy The same price to all customers who purchase products under essentially the same conditions and quantities Exchange rate changes may make this difficult in international markets Flexible pricing (e.g., in channels, business markets, expensive consumer shopping products) Issues: Use is increasing because of impact of information technology, customer databases, scanners, etc Selling costs may be higher if prices are negotiated “Signals” to competitors Customer dissatisfaction may be a problem “Gray channels” and crossshipping 174 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Price Level Policies Skimming Pricing Price Initial skimming price Sell at high price before reducing to next price level and repeat Second price Final price “Skim the cream” pricing involves selling at a high price to those who are willing to pay before aiming at more pricesensitive consumers Quantity 175 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Price Level Policies Penetration Pricing Price Penetration pricing involves selling the whole market at one low price Whole market price Quantity 176 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Discount Pricing Quantity Seasonal Discount Pricing Sale Cash Trade 177 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Allowances Advertising Allowance Common Kinds of Allowances Stocking Allowance Push Money Allowance Trade-In Allowance 178 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Geographic Pricing Policies F.O.B Common Geographic Pricing Policies Zone Uniform Delivered Freight Absorption 179 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited Value Pricing ???? ???? ???? ???? ???? $ 1710 Focus Focus on on Customer Customer Requirements Requirements Target Target Market Market and and Competition Competition Fits Fits with with Strategy Strategy Planning Planning For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill Ryerson Limited ... Ryerson Limited Allowances Advertising Allowance Common Kinds of Allowances Stocking Allowance Push Money Allowance Trade-In Allowance 178 For use with Shapiro, Wong, Perreault, and McCarthy texts... 2002 McGraw-Hill Ryerson Limited Discount Pricing Quantity Seasonal Discount Pricing Sale Cash Trade 177 For use with Shapiro, Wong, Perreault, and McCarthy texts Copyright © 2002 McGraw-Hill... under essentially the same conditions and quantities Exchange rate changes may make this difficult in international markets Flexible pricing (e.g., in channels, business markets, expensive consumer shopping products)