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that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels, delivery frequency, guarantees, service contracts, and other factors. Geographical Pricing (Cash, Countertrade, Barter) a)In geographical pricing, the company decides how to price its products to different customers in different locations and countries. b)Another question is how to get paid. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. Many buyers want to offer other items in payment, a practice known as countertrade. Price Discounts and Allowances Most companies will adjust their list price and give discounts and allowances for early payment, volume purchases, and off-season buying (see Table 14.5 of the textbook). Companies must do this carefully or find their profits much lower than planned. a)Discount pricing has become the modus operandi of a surprising number of companies offering both products and services. b)Some product categories tend to self-destruct by always being on sale. c)Discounting can be a useful tool if the company can gain concessions in return. d)Sales management needs to monitor the proportion of customers who are receiving discounts. e)Higher levels of management should conduct a net price analysis to arrive at the “real price” of their offering.Promotional Pricing Companies can use several pricing techniques to stimulate early purchase: 1) Loss-leader pricing; 2) Special-event pricing; 3) Special customer pricing; 4) Cash rebates;
MKT202 STUDY UNIT 4 SU4-6 5) Low-interest financing; 6) Longer payment terms; 7) Warranties and service contracts; and 8) Psychological discounting. Differentiated PricingCompanies often adjust their basic price to accommodate differences in customers, products, locations, and so on. Price discrimination occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. a)The phenomenon of offering different pricing schedules to different consumers is exploding. b)Research shows that constant price variations work best in situations where there is no bond between buyer and seller. c)The tactic most companies favour, however, is to use variable prices as a reward rather than a penalty. d)Some forms of price discrimination are illegal. e)Price discrimination is legal if the seller can prove that its costs are different when selling different volumes or different quantities of the same product to retailers. f)Predatory pricing − selling below cost with the intent of destroying competition − is unlawful. g)For price discrimination to work, certain conditions must exist: 1)The market must be segmentable and the segments must show different intensities of demands.