CH18 - Chapter 18 Pricing Strategies Pricing Strategies...

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Chapter 18 Pricing Strategies Pricing Strategies Specific pricing strategies grow out of the overall marketing strategy Skimming Pricing Strategy Skimming pricing strategy Pricing strategy involving the use of a high price relative to competitive offerings Commonly used as a market entry price for distinctive goods or services with little or no initial competition Sometimes used throughout the life of a product, as with luxury goods Permits marketers to control demand but also attracts competitors Price Reductions to Increase Market Share Price declines can help marketers capture greater market share during late growth and early maturity stages Penetration Pricing Strategy Penetration pricing strategy Pricing strategy involving the use of a relatively low entry price compared with competitive offerings, based on the theory that this initial low price will help secure market acceptance Price level may increase to match competitors once product has recognition in the market Example: Credit card companies that offer low introductory interest rates Competition may lower prices to counter this strategy Works best for goods and services that have: Highly elastic demand low production and marketing costs A high likelihood of attracting strong competitors Everyday low pricing (EDLP) Strategy devoted to continuous low prices as opposed to relying on short term, price-cutting tactics such as cents-off coupons, rebates, and special sales Some retailers, such as grocery stores, oppose EDLP strategies Prefer high-low strategy that set profitable regular prices to offset losses from frequent sales and promotions Disadvantages of EDLP: Easy for competitors to match Unless demand is elastic, reduces revenue throughout industry May generate image of questionable quality Competitive Pricing Strategy Competitive Pricing Strategy Pricing strategy designed to deemphasize price as a competitive variable by pricing product at the general level of comparable offerings Example: Home Depot and Lowe’s both promise to meet and beat competitors’ prices May use opening price point by, for example, pricing a quality private-label product below the competition Prices can drop when competitors continually match each other If demand is not elastic, overall revenue of industry will drop Nearly two-thirds of all firms use competitive pricing as their primary pricing strategy Forces firms to compete based on non-price variables in the marketing mix Price Quotations List price Established price normally quoted to potential buyers Reductions from List Price
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CH18 - Chapter 18 Pricing Strategies Pricing Strategies...

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