Chapter 11 - Pricing Products: Pricing Strategies 11 11...

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Unformatted text preview: Pricing Products: Pricing Strategies 11 11 Principles of Marketing Learning Objectives After studying this chapter, you should be able to: 1. Describe the major strategies for pricing initiative and new products 2. Explain how companies find a set of prices that maximize the profits from the total product mix 3. Discuss how companies adjust their prices to take into account different types of customers and situations 4. Discuss the key issues related to initiating and responding to price changes 11-2 Chapter Outline 1. New-Product Pricing Strategies 2. Product Mix Pricing Strategies 3. Price Adjustment Strategies 4. Price Changes 5. Public Policy and Pricing 11-3 New-Product Pricing Strategies Pricing Strategies • Market skimming pricing • Market penetration pricing 11-4 New-Product Pricing Strategies Pricing Strategies Market skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market • Product quality and image must support the price • Buyers must want the product at the price • Costs of producing the product in small volume should not cancel the advantage of higher prices • Competitors should not be able to enter the market easily 11-5 New-Product Pricing Strategies Pricing Strategies Market penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share • Price sensitive market • Inverse relationship of production and distribution cost to sales growth • Low prices must keep competition out of the market 11-6 Product Mix Pricing Strategies Pricing Strategies • Product line pricing • Optional product pricing • Captive product pricing • By-product pricing • Product bundle pricing 11-7 Product Mix Pricing Strategies Pricing Strategies Product line pricing takes into account the cost differences between products in the line, customer evaluation of their features, and competitors’ prices Optional product pricing takes into account optional or accessory products along with the main product 11-8 Product Mix Pricing Strategies Pricing Strategies Captive product pricing involves products that must be used along with the main product • Two-part pricing is where the price is broken into: • Fixed fee • Variable usage fee 11-9 Price Adjustment Strategies Pricing Strategies By-product pricing refers to products with little or no value produced as a result of the main product. Producers will seek little or no profit other than the cost to cover storage and delivery....
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This note was uploaded on 04/08/2011 for the course BUS 312 taught by Professor Wittenberg,h during the Spring '08 term at University of Hawaii, Manoa.

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Chapter 11 - Pricing Products: Pricing Strategies 11 11...

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