Chapter 26 – Pricing Strategies
Basic Pricing Concepts
 Demand-Oriented Pricing
 _____________________ Pricing
 Cost-Oriented Pricing
Demand-Oriented Pricing
 marketers attempt to determine what consumers are _______________ for specific goods and
services
 key - consumers ___________ value of item
 rely on _______ and ________ theory
Competition-Oriented Pricing
 _______________ between cost and price or demand and price
 marketers elect to take one of ________ actions compared to competitors (price above; price below,
or price in line with competition
________________ Pricing
 Marketers 1st calculate the all ___________________ then add a projected profit margin
 Resellers (wholesalers and retailers) use concept - __________ (difference between an item's cost and
sale price)
 Manufacturers and Service Business costs are ________ (change depending on how much labor or
supplies cost or how much is produced)
Pricing Policies:
 One-price policy - all customers are charged the _______________
 _______________ policy - customers pay different prices for the same type or amount of merchandise
New Products (Introduction)
 Skimming pricing - a policy that sets a _______________ for a new product (price will eventually need
to be lowered
 disadvantage - attracts ______________
 Penetration pricing - price for a new product is set __________
 encourage as many people as possible to purchase product (gain _______________)
 disadvantage - if product not in ___________, will result in a bigger loss
Growth Stage:
 Very ______________ will be made in growth stage for products introduced with penetration pricing
 Skimming pricing - once sales level off - prices should be ____________
Maturity Stage:
 ________ the life of the product
 reducing price; adding _____________ or improvement; look for ______ markets
Decline Stage:
 companies are forced to _________ the price to generate sales (reduce promotions; reduce
manufacturing costs)
 Cut product when no longer ___________
Product Mix Strategies:

Product mix pricing strategies - involve adjusting ___________ to maximize the profitability for a
_______of products rather than for just one
 _____________ - technique that sets a limited number of prices for specific groups or line of
merchandise (ex. - all sweatshirts $20, $25, $30)
 Optional product - setting prices for ______________ or options sold with the main product (ex. - car
accessories)
 Captive product - sets the price for one product _____ but makes up for it by pricing the
__________high (ex. - razor blades, x-box)
 By-product - pricing ________ materials very cheaply (ex. tire by-product for tracks)
 Bundle pricing - company offers several _______________ products in a page that is sold at a single
price (ex. Microsoft Office)
Geographical pricing: price adjustments required because of ___________ shipping agreements
Segmented Pricing Strategies:
 uses ___________ different prices for a product, though there is no difference in the item's cost
 Buyer Identification - recognizing a buyer's _______________ to price (airlines)
 Product Design - creating ____________ prices for different product styles (color)
 Purchase Location - pricing according to _________ a product is sold and the location of the good or
service (Broadway shows more expensive in NY than when go on road)
 Time of Purchase - charging more during _________ (utility rates, telephone)
Psychological Pricing Strategies: pricing techniques that help create an ____________ for customers
 Odd/Even pricing - setting price figures that _____ in either odd or even numbers
o odd numbers convey a bargain image ($.99; $99.89); even numbers convey a quality image
($10; $1000)
 ___________pricing - sets higher than average prices to suggest ______ and high quality (Tiffany
jewelry; Rolex watches)
 Multiple-Unit pricing - pricing items in ___________ (3 for $1.00)
 Everyday low prices (EDLP) - low prices set on a ________________ with no intention of raising them
or offering discounts (Wal-Mart)
Promotional Pricing: used in conjunction with __________________ when prices are reduced for a short
period of time
 Loss Leader Pricing - used to increase store traffic by offering _____________ items for sale at belowcost prices
 ______________ - prices reduced for a short period of time based on a specific event (back-to-school)
 Rebates - partial refunds provided by the _______________ to consumers (send in rebate)
 Coupons - customers take reductions at the time of _______________
Discounts and Allowances:
 Cash Discounts - cash discounts offered to buyers to _____________ them to pay bills quickly
o 3/10, net 30 (3% __________ if paid in 10 days; if discount not taken - bill due in 30 days)
 Quantity Discounts - offering discount to buyers for placing ______________
o (noncumulative-discounts offered on _______ order; cumulative-discount offered on all orders
over a specified period of time)
 Trade Discounts - prices for __________ and ________________ (less than list price)
 Seasonal Discounts - offered to buyers will to buy at outside the ______________ buying season
 Allowances - customers offered a price reduction if they sell back an ________________ (cars)
Steps in determining prices:
1. Establish pricing _______________
2. Determine costs
3. Estimate ____________
4. Study the ______________
5. Decide on a pricing strategy
6. Set prices
Pricing Technology:
 Smart Pricing - software which crunch numbers for businesses showing how much to price new
merchandise and when to discount (___________________ according to changing market conditions)
 Electronic shelves and digital price labels - allow customers to scan products to determine price and
check out without a ______________
 RFID (Radio Frequency Identification) - _______________________ that uses chips embedded in
products