MKT 304 Chapter 16: Key Concepts
Pricing Objectives and Policies
• Price
• Target return objective
• Profit maximization
objective
• Sales-oriented objective
• Status quo objectives
• One-price policy
• Flexible-price policy
• Nonprice competition
• Administered prices
• Skimming price policy
• Penetration price policy
• Introductory price dealing
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Basic list prices
Discounts
Allowances
Zone pricing
Uniform delivered pricing
Freight absorption pricing
Value pricing
Unfair trade practice acts
Dumping
Phony list prices
Wheeler-Lea Amendment
Price fixing
Robinson-Patman Act
Price discrimination
Exhibit 16-1
Strategy Planning for Price
Exhibit 16-2
The Price Equation: Price Equals Something of Value
Exhibit 16-3
Price as Seen by Channel Members
Exhibit 16-4
Objectives Should Guide Strategy Planning for Price
Most Firms Set Specific Pricing
Policies to Reach Objectives
Flexible-Price
Policy
One-Price
Policy
•
The same for
everyone
•
Frequently
purchased items
OR
•
Different
customers,
different prices
•
Databases make
it easier
•
Convenient
•
Low cost
•
•
Maintains
goodwill
Salespeople can
adjust prices
•
Too much cutting
can hurt profits
Price-Level Policies
Vary Throughout the Product Life Cycle
New Product Pricing Policies
Legal Concerns
Penetration
Pricing Policy
Skimming
Pricing Policy
Maturity
Growth
Introduction
• High initial price
• Inelastic demand
• Price insensitivity by the market
Ethical
Concerns
Strategic
Pricing
Concerns
Decline
New Product Pricing Policies
Legal Concerns
Skimming Pricing
Policy
Penetration
Pricing Policy
Maturity
Growth
Introduction
• Low initial price
• Elastic demand
• Price sensitivity by the market
Ethical
Concerns
Strategic
Pricing
Concerns
Decline
Discount Policies: Reductions from List Prices
Quantity
Seasonal
From
List Price
Sale
Cash
Trade
Allowance Policies – Off List Prices
Advertising
Stocking
Common
Types of
Allowances
Trade-Ins
Push Money
List Price May Depend on
Geographic Pricing Policies
F.O.B.
Zone
Common
Geographic
Policies
Freight
Absorption
Uniform
Delivered
Legality of Pricing Policies
Unfair Trade
Practice Acts
Dumping
Key
Issues
Price Fixing
Phony List
Prices
Price Discrimination
“Like Grade &
Quality”
RobinsonPatman Act
“Proportionately
Equal” Basis
Key
Issues
Meeting
Competition
Cost
Differences