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1、1,Chapter 13 Pricing Strategies,2,Chapter 13,Skip: Robinson-Patman Act (p. 372-373) Unfair-Practices Acts (p. 378),3,PRICE VS NONPRICE COMPETITION,Price Competition Price Competition price as low as possible and accompanied by a minimum of services (compete on price). Value pricing - aims to improve
2、 a products value which is the ratio of its benefits to its price and related costs. Improve value by :1. offers products with lower prices but the same or added benefits at the same time seeks way to reduce expenses so profits do not suffer;2. offers a much better product with a higher price than c
3、ompeting entries,4,PRICE VS NONPRICE COMPETITION,Nonprice Competition sellers will not compete on price (maintain price) but the sellers will compete on product, distribution, and promotion. Based on this competition, the demand curve is shifted to the right. Advantages of Nonprice Competition1. Inc
4、rease in sales with no decrease in selling price2. Companies have more control whereas customers are more loyal. Firms employing nonprice competition should:1. Build strong brand equity2. Develop unique product or create attractive promotional programs e.g., 50% discount 3. Emphasize the variety and
5、 quality of the services offered to customers.,5,Market-Entry Pricing Strategies,Market-Skimming Pricing- setting high price for a new product Market-skimming pricing is appropriate when: Your new product has distinctive features strongly desired by consumers. Demand is inelastic. Your new product c
6、annot be copied easily.,6,Advantages of Skimming Pricing1. High profit margin so R&D costs are quickly recovered.2. High prices can suggest high product quality.3. High price will limit demand to levels that do not exceed the firms production capacities.4. Greater flexibility - firms can easily lowe
7、r the price later,Market-Entry Pricing Strategies,7,Market-Penetration Pricing - setting relatively low initial price for a new product. Market-penetration is suitable when : Market is large. Demand is elastic. Substantial reductions in unit costs can be achieved (through EOS). There is a fierce com
8、petition in the market.,Market-Entry Pricing Strategies,8,Advantages of Market-Penetration Pricing1. Immediately enter the market.2. Generate large sales volume and a large market share.3. Discourage other firms from introducing competing products.,Market-Entry Pricing Strategies,9,DISCOUNTS AND ALL
9、OWANCES,1. Quantity Discounts money off which a cust will get for buying large amount There are 2 types of quantity discounts :1.1 Non-cumulative discount - based on the size of an individual order of one or more products.1.2 Cumulative discount - based on the total volume purchased over a specified
10、 period. 2. Trade Discounts or “functional discounts” are reductions which a cust (distributor) will get for performing marketing tasks.,10,DISCOUNTS AND ALLOWANCES,3. Cash Discounts money off which a cust will get for paying bills within a specified time e.g., 3/10, n/45, or in cash. 4. Other Disco
11、unts and Allowances 4.1 Rebate - discount on a product that a customer obtains by submitting a form or certificate provided by the seller.- Mail-in - Coupon 4.2 Price Customization - establishes various prices on the basis of how much different people value a product. 4.3 Seasonal Discount - discoun
12、t will be given when an order is placed during the slack season. 4.4 Promotional Allowance - price reduction for promotional services performed by buyers.,11,GEOGRAPHIC PRICING STRATEGIES,1. Point-of-Production Pricing or “FOB factory pricing” or FOB mill pricing the seller quotes the selling price
13、at the point of production, and the buyer selects the mode of transportation and pays all freight costs.- The seller pays only for loading the shipment onto the freight carrier.2. Uniform Delivered Pricing or “Postage Stamp Pricing” one price to all buyers regardless of their locations.- used where
14、freight costs are a small part of the sellers total cost (seller pays the freight).,12,GEOGRAPHIC PRICING STRATEGIES,3. Zone-Delivered Pricing - one price for one zone.- The freight charge is an average of the charges to all points within a zone (seller pays the freight).,13,4. Freight-Absorption Pr
15、icing factory price plus the freight costs that would be charged by a competitive seller located near that customer.- to offset competitive disadvantages of FOB factory pricing.- The supplier decides to absorb some freight cost as long as the net revenue is larger than its marginal costs.Freight abs
16、orption is useful when a firm has:- excess capacity, - high fixed costs, and - low variable costs per unit of product,GEOGRAPHIC PRICING STRATEGIES,14,Special Pricing Strategies & Situations,One-Price Strategy one price to all similar buyers Flexible-Price Strategy or “Variable-Price Strategy”-diffe
17、rent prices to similar buyers as bargaining is allowed Flat-Rate Pricing a purchaser pays a fixed single price and then can consume as little or as much of the product as desired e.g., Oishi charges Bt 500 regardless of the amount foods. Single-Price Strategy - all items are sold under the same single price e.g., Everything is Bt 10.,
