How strong are current competitors and what are their

 How strong are current competitors and what are their current pricing
strategies?
LO2: Identify and define the other important external and internal factors affecting a firm’s pricing
decisions
 Internal factors include:
o Company’s overall marketing strategy, objectives and marketing mix
 Pricing strategy largely determined by decisions on brand positioning
 Target costing: starts with an ideal selling price and targets costs that will ensure
the price is met
 External factors include:
o The nature of the market and the demand and other environmental factors
 Pure competition
 Monopolistic competition
 Oligopolistic competition
 Pure monopoly
LO3: Describe the major strategies for pricing new products
 Market-skimming pricing: set initial high prices to skim revenues from the market
o Product’s quality and image must support the higher price
o Cost of producing a smaller volume cannot cancel benefit of charging more

 Market-penetration pricing: set a low initial price in order to penetrate the market quickly and
deeply
LO4: Explain how companies find a set of prices that maximizes the profits from the total product mix
 Product line pricing
o Management must decide on the price steps to set between the various products in a
line
 Optional-product pricing
o Main product is sold at a low margin or near cost price, and marketers focus on
promoting the extras and upgrades
 Captive-product pricing
o Producers of the main products often price them low and set high mark-ups on the
supplies
o Two-part pricing: fixed fee plus a variable usage rate
 By-product pricing
o Company seeks a market for these by-products to help offset the costs of disposing of
them and to help make the price of the main product more competitive
 Product bundle pricing
o Sellers often combine several of their products and offer the bundle at a reduced price
LO5: Discuss how companies adjust their prices to take into account different types of customers and
situations
 Discount and allowance pricing
 Segmented pricing
o Customer-segmented pricing
o Product-form pricing
o Location-based pricing
o Time-based pricing
 Psychological pricing
 Promotional pricing
o Companies will temporarily price their products below list price and sometimes even
below cost to create buying excitement and urgency
 Geographical pricing
o FOB-origin pricing: customer pays freight costs
o Uniform-delivered pricing: company charges the same price plus freight to all customers
 Dynamic pricing
o Adjusting prices continually to meet the characteristics and needs of individual
customers and situations
 International pricing
o Depends on economic conditions, competitive situations, laws and regulations, and
development of the wholesaling and retailing system
LO6: Discuss the key issues related to initiating and responding to price changes

 Initiating price changes
o Price cuts
 Excess capacity, falling demand, dominate the market
o Price increases
 Cost inflation
 Responding to price changes
o