Kotcha11aPricing

Kotcha11aPricing - Chapter 11 Pricing Products Pricing...

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1     Chapter 11 Pricing Products: Pricing Considerations and  Strategies 
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2 New Product Pricing  Strategies Market Skimming   Setting a High Price for  a New Product to  “Skim” Maximum  Revenues from the  Target Market. Results in Fewer, But  More Profitable Sales. Use Under These  Conditions: Product’s Quality and  Image Must Support Its  Higher Price. Costs Can’t be so High that  They Cancel the  Advantage of Charging  More. Competitors Shouldn’t be  Able to Enter Market Easily  and Undercut the High  Price.
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3 New Product Pricing  Strategies Market Penetration   Setting a Low Price for a  New Product in Order to  “Penetrate” the Market  Quickly and Deeply. Attract a Large Number of  Buyers and Win a Larger  Market Share. Use Under These  Conditions: Market Must be Highly  Price-Sensitive so a Low  Price Produces More  Market Growth. Production/ Distribution  Costs Must Fall as Sales  Volume Increases. Must Keep Out  Low Price Position or  Benefits May Only be  Temporary.
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4 Product Mix-Pricing  Strategies: Product Line Pricing Involves setting price  steps between various  products in a product  line based on: Cost differences between  products, Customer evaluations of  different features, and            competitors’ prices.
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5 Product Line Pricing Cross-elasticity of demand: the % change in Q b in response to a % change in P a Substitutes: positive cross-elasticity of demand Drop the price of bologna and sales of salami may also drop
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Kotcha11aPricing - Chapter 11 Pricing Products Pricing...

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