Chapter 11: Marketing: Pricing: Additional Considerations Flashcards
Market-skimming pricing
Market-skimming pricing strategy sets high initial prices to
“skim” revenue layers from the market.
* Product quality and image must support the price.
* Buyers must want the product at the price.
Market-penetration pricing
Market-penetration pricing involves setting a low price for a new product in order to attract a large number of buyers and a large market share.
Price Adjustment Strategies
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Price cuts occur due to:
Price increases occur due to:
Price cuts occur due to:
* Excess capacity
* Lower demand
* Competitive pressure
Price increases occur due to:
* Cost inflation
* Increased demand
* Lack of supply
Buyer Reactions to Pricing Changes
* Price increases
– Product is “hot”
– Company greed
* Price cuts
– New models will be available
– Models are not selling well
– Quality issues
Competitor Reactions to Pricing Changes
- Why did the competitor change the price?
- Is the price cut permanent or temporary?
- Is the company trying to grab market share?
- Is the company doing poorly and trying to increase sales?
- Is it a signal to decrease industry prices to stimulate demand?
Responding to Pricing Changes
* Reduce price to match competition
* Maintain price but raise the perceived value through
communications
* Improve quality and increase price
* Launch a lower-price “fighting” brand
Public Policy and Pricing (EU)
- Price fixing legislation requires sellers to set prices without talking to competitors.
- Predatory pricing legislation prohibits selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business.
- Deceptive pricing occurs when a seller states prices or price
savings that mislead consumers or are not actually available to
consumers.
– Bogus reference or comparison prices
– Price increase before major “sale”
