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Unformatted text preview: ending in an odd number
to connote a bargain and a price ending in an even number to connote quality. Discount stores
tend to use odd pricing, and specialty boutiques commonly use even pricing.
PRICE BUNDLING is marketing two or more products in a single package for a special price.
Microsoft offers “suites” of software that bundle items such as spreadsheets, word processing,
graphics, e-mail, and so forth. Others include the telecommunications industry and ski resorts.
TWO-PART PRICING means establishing two separate charges to consume a single good or
service. Examples would include health and tennis clubs that charge both a membership fee and a
fee each time the facilities are used.
KEY: CB&E Model Pricing OBJ: 20-3 TOP: AACSB MSC: BLOOMS Synthesis 15. What are consumer penalties? What two reasons do businesses give for requiring consumers to
Consumer penalties are extra fees paid by consumers for violating the terms of purchase
agreements. Businesses impose consumer penalties for two reasons: They will allegedly (1) suffer
an irreversible revenue loss and/or (2) incur significant additional transaction costs should
customers be unwilling or unable to comply with the purchase agreement.
KEY: CB&E Model Pricing OBJ: 20-3 TOP: AACSB MSC: BLOOMS Synthesis 16. What is product line pricing? What three relationships among products in the line must managers
be aware of before setting prices? For each relationship, give an example of a product that fits the
Product line pricing is setting prices for the entire line of products rather than for a single
component of the line. In product line pricing, the marketing manager attempts to achieve
maximum profits or other goals for the entire line. Before determining price, the manager must
determine the type of relationship that exists among the various products in the line. Three types
of relationships exist: complementary, substitute, and neutral.
COMPLEMENTARY PRODUCTS. In this case, an increase in sales for one item in the line will
increase demand for a complementary product in the line. Examples of complementary products
include shampoo and conditioner or skis and ski poles.
PRODUCT SUBSTITUTES. Items in a line may also act as substitutes for one another. If a buyer
purchases one item in the line, he or she will be less likely to purchase a second, substitutable
item in the line. Examples of substitutable items would be liquid and powder Tide laundry
detergent or paste and liquid Turtle Wax car polish.
NEUTRAL RELATIONSHIP. In this case, the demand for one product is not related to the
demand for any other product. Examples include Ralston Purina’s sale of chicken feed and Wheat
Chex or Gillette’s sale of disposable razors and disposable writing pens.
KEY: CB&E Model Pricing OBJ: 20-4 TOP: AACSB MSC: BLOOMS Synthesis 17. Nellie Tompkins is the owner and operator...
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This document was uploaded on 09/29/2013.
- Fall '13