11. Pricing Strategies Flashcards
Market-skimming pricing (price skimming) (def, conditions)
Setting a “high price” for a new product to “skim maximum revenues layer by layer from the segments willing to pay the high price”; the company makes “fewer but more profitable sales”.
Conditions:
- The product’s quality and image must support its higher price
- Enough buyers must want the product at that price
- The costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more
- Finally, competitors should not be able to enter the market easily and undercut the high price
Market-penetration pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
Conditions:
- The market must be highly price sensitive so that a low price produces more market growth.
- Production and distribution costs must decrease as sales volume increases
- The low price must help keep out the competition, and the penetration pricer must maintain its low-price position
“Product Mix” Pricing Strategies
- Product line pricing
- Optional product pricing
- Captive product pricing
- By-product pricing
- Product bundle pricing
product line pricing
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.
Companies usually develop product lines rather than single products. In product line pricing, management must determine the price steps to set between the various products in a line. The product line could include a broad range of prices for the various products.
For example, Quicken offers an entire line of financial management software, including Starter, Deluxe, Premier, Home & Business, and Rental Property Manager versions priced at $29.99, $64.99, $94.99, $104.99, and $154.99, respectively. Although it costs Quicken no more to produce the Premier version than the Starter version, many buyers happily pay more to obtain additional Premier features, such as financial-planning, retirement, and investment-monitoring tools. Quicken’s task is to establish perceived value differences that support the price differences.
Optional-product pricing
The pricing of optional or accessory products along with a main product.
For example, a car buyer may choose to order a navigation system and premium entertainment system. Refrigerators come with optional ice makers.
And when you order a new laptop, you can select from a bewildering array of processors, hard drives, docking systems, software options, and service plans.
Pricing options is a sticky (khó khăn) problem. Companies must decide which items to include in the base price and which to offer as options.
Captive-product pricing
Setting a price for products that must be used along with a main product, (such as blades for a razor and games for a videogame console.)
Amazon makes little profit on its Kindle readers and tablets but makes up for the close-to-cost prices through sales of content for the devices. Examples of “captive products are razor blade cartridges, videogames, printer cartridges (ống mực), and e-books.”
Producers of the main products often price them low and set high markups on the supplies. For example, Amazon introduced its Kindle Fire tablet for as low as $199, a loss of an estimated $10 per machine. It hoped to more than make up for the loss through sales of digital books, music, and movies to be viewed on the devices.
However, must be careful -> Finding the right balance between the main product and captive product prices can be tricky. Even more, consumers trapped into buying expensive captive products may come to resent the brand that ensnared (đánh bẫy) them.
In the case of services, captive product pricing is called “two-part pricing”. The price of the service is broken into “a fixed fee plus a variable usage rate”. Thus, at Six Flags and other amusement parks, you pay a daily ticket or season pass charge plus additional fees for food and other in-park features.
By-product pricing
Setting a price for by-products to help offset the costs of disposing of them and help make the main product’s price more competitive. (turning trash into cash)
Product bundle pricing
Combining several products and offering the bundle at a reduced price.
For example, fast-food restaurants bundle a burger, fries, and a soft drink at a “combo” price. And Comcast, Time Warner, Verizon, and other telecommunications companies bundle TV service, phone service, and high-speed Internet connections at a low combined price. Price bundling can promote the sales of products consumers might not otherwise buy, but the combined price must be low enough to get them to buy the bundle.
“New Product” Pricing Strategies
- Market-skimming pricing
2. Market-penetration (sự thâm nhập) pricing
Price Adjustment Strategies
- Discount and Allowance Pricing
- Segmented Pricing
- Psychological Pricing
- Geographical pricing
- Dynamic Pricing
- International Pricing
Discount
A straight reduction in price on purchases during a stated period of time or of larger quantities.
+ cash discounts for paying promptly
+ quantity discounts for buying in large volume,
+ functional (trade) discounts for selling, storing, distribution, and record keeping.
Allowance
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way.
+ trade-in allowances for turning in old items when buying new ones
+ promotional allowances to reward dealers for participating in advertising or sales support programs.
(nhận tiền khi giới thiệu thêm khách cho Bác)
Segmented pricing
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.
A “roomier business class seat” on a flight from New York to London is many times the price of an “economy seat” on the same flight. To customers who can afford it, the extra comfort and service are worth the extra charge. In segmented pricing companies will often adjust their basic prices to allow for differences in customers, products, and locations.
Segmented pricing takes several forms.
- Customer-segment pricing
different customers pay different prices for the same product or service. (Museums and movie theaters may charge a lower admission for students and senior citizens. ) - Product-form pricing
different versions of the product are priced differently but not according to differences in their costs. - Location-based pricing
a company charges different prices for different locations, even though the cost of offering each location is the same. For instance, state universities charge higher tuition for out-of-state students, and theaters vary their seat prices because of audience preferences for certain locations. - Time-based pricing
a firm varies its price by the season, the month, the day, and even the hour. For example, movie theaters charge matinee pricing during the daytime, and resorts give weekend and seasonal discounts.
psychological pricing
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product.
