Product bundle pricing: combining several products & offering bundle at reduced pricePrice building can promote sale of products that consumers might not otherwise buy, but combined price must be low enough to get them to buy bundlePrice Adjustment Strategies Companies usually adjust basic prices to account for various customer differences & changing situationsDiscount and Allowance Pricing Most companies adjust basic price to reward customers for certain responses, such as early payments of bills, volume purchases, and off-season buying oDiscounts & allowances Many forms of discountsoStraight reduction in price on purchases during stated period of time or on larger quantities oCash discountPrice reduction to buyers who pay bills promptly oQuantity discountPrice reduction to buyers who buy large volumes oSeasonal discount: price reduction to buyers who buy merchandise orservices out of season
Allowances:promotional money paid by manufacturers to retailers in return for agreement to feature manufacturer’s products in some way oTrade-in allowancesPrice reductions given for turning in old item when buying new oneoPromotional allowancesPayments or price reductions to reward dealers for participating in advertising & sales support programsSegmented Pricing Companies will often adjust basic prices to allow for differences in customers, products, & locationsSegmented pricing:selling product or service at two or more prices, where difference in prices is not based on differences in costs oCustomer-segment pricingDifferent customers pay different prices for same product or serviceoProduct-form pricingDifferent versions of product are priced differently but not according to differences in their costs EX: round-trip economy seat flight from TO to London might cost $1200, whereas business-class seat on same flight might cost $5000 or moreoLocation-based pricingCompany charges different prices for different locations, even though cost of offering each location is sameoTime-based pricingFirm varies its price by season, month, day, even hourEx: movie theatre charge matinee pricing during daytimeFor segmented pricing to be effective strategy, certain conditions must existoMarket must be segmentable oSegments must show different degrees of demandoCosts of segmenting & watching market cannot exceed extra revenue obtained from price difference
oSegmented pricing must also be legaloSegmented prices should reflect real differences in customers’ perceived valueConsumers in high price tiers must feel that they’re getting extra money’s worth for higher prices paid Companies must be careful not to treat customers in lower price tiers as second-class citizens Psychological Pricing Price say something about productoEx: many consumers use price to judge qualityPsychological pricing: pricing that considers psychology of prices & not
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- Spring '15
- Pricing, o Company, Price