2)Market-segment requirements.3)Purchase timing.4)Order levels.5)Delivery frequency.6)Guarantees.7)Service contracts.8)Other factors.B)As a result of discounts, allowances, and promotional support, a company rarelyrealizes the same profit from each unit of a product it sells. Geographical Pricing (Cash, Countertrade, Barter)A)Geographical pricing involves the company in deciding how to price its products todifferent customers in different locations and countries. 1)Should the company charge higher prices to distant customers to cover the highershipping costs or a lower price to win additional business? 145
Chapter-by-Chapter Instructional Material2)How should exchange rates and the strength of different currencies be accountedfor?3)Another issue is how to get paid.a.Many buyers want to offer other items in payment, a practice known ascountertrade.B)Countertrade may account for 15 to 25 percent of world trade and takes several forms:1)Barter.2)Compensation deal.3)Buyback arrangement.4)Offset.Price Discounts and AllowancesA)Most companies will adjust list prices and give discounts and allowances for earlypayment, volume purchases, and off-season buying. Table 14.4 shows price discounts and allowances.B) Discount pricing has become the modus operandi of a surprising number ofcompanies offering both products and services. C)Some product categories tend to self-destruct by always being on sale.D)Discounting can be a useful tool if the company can gain concessions in return. E)Sales management needs to monitor the proportion of customers who are receivingdiscounts. F)Higher levels of management should conduct a net price analysis to arrive at the “realprice” of their offering. Promotional PricingA)Companies can use several pricing techniques to stimulate early purchase:1)Loss-leader pricing.2)Special-event pricing.3)Cash rebates.4)Low-interest financing.5)Longer payment terms.6)Warranties and service contracts. 7)Psychological discounting.B)Promotional-pricing strategies are often a zero-sum game. 146
Chapter 14: Developing Pricing Strategies and ProgramsDifferentiated PricingA)Companies often adjust their basic price to accommodate differences in customers,products, locations, and so on. B)Price discrimination occurs when a company sells a product or service at two or moreprices that do not reflect a proportional difference in costs. 1)In first-degree price discrimination, the seller charges a separate price to eachcustomer depending on the intensity of his or her demand. 2)In second-degree price discrimination, the seller charges less to buyers who buy alarger volume.
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