Chapter 14 Arriving at the final price

Chapter 14 Arriving at the final price - Chapter 14...

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Arriving at the final price STEP 4: SELECT AN APPROXIMATE PRICE LEVEL 1) Demand oriented approaches *weigh factors underlying expected customer tastes and preferences more heavily than such factors as cost, profit, and competition when selecting price a) Skimming pricing- setting the highest initial price that customers really desiring the product are willing to pay i) When there is a new product introduced ii) Customers are not very price sensitive iii) As demand of these customers is satisfied the firm lowers the price to attract another, more price- sensitive segment iv) Effective when (1) Enough prospective customers are willing to buy the product immediately at the high initial price (2) The high initial price will not attract competitors (3) Lowering price has only a minor effect on increasing the sales volume and reducing the unit costs (4) Customers interpret the high price as signifying high quality (a) Conditions will most likely exist when the new product is protected b) Penetration pricing- setting a low initial price on a new product to appeal immediately to the mass market i) Conditions: (1) Many segments of the market are price sensitive (2) Low initial price discourages competitors from entering the market (3) Unit production and marketing costs fall dramatically as production volumes increase ii) In some cases penetration pricing follows skimming pricing c) Prestige pricing- setting a high price so that quality or status conscious consumers will be attracted to the product and buy it i) Stay above initial price d) Price lining- often a firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points e) Odd-even pricing- setting prices a few dollars or cents under an even number f) Target pricing- manufacturer deliberately adjusting the composition and features of a product to achieve the target price to consumers g) Bundle pricing- marketing of two or more products in a single package price i) Lower total cost for buyers and sellers h) Yield management pricing- charging of different prices to maximize revenue for a set amount of capacity at any given time i) Varying price by time, day , week, or season 2) Cost-oriented approaches *focuses on the cost side of the pricing problem, not the demand )a Standard markup pricing- adding a fixed % to the cost of all items in a specific product class. )i
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This note was uploaded on 03/31/2008 for the course MARKETING 305 taught by Professor Joanne during the Winter '07 term at University of Wisconsin.

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Chapter 14 Arriving at the final price - Chapter 14...

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