Chapter 14 (2) Flashcards
Price Discrimination
Occurs when a firm sells the same product to two or more customers at different prices.
when is price discriminating legal or illegal?
- Generally illegal when a vendor sells to retailers except:
costs are different
quantity and functional discounts
changing market conditions - Generally legal when a retailer sells to consumers
First Degree Price Discrimination
Charging each customer as much as the customer is willing to pay
- Auction bidding
- Re-pricing when customers use a loyalty card
Second- Degree Price discrimination
Promotional markdowns
Offering the same multiple price schedule to all customers, which encourages price sensitive customers to take advantage of the lower price
Clearance markdowns for fashion merchandise Coupons Rebates Price bundling Multiple-unit pricing
Third-Degree Price Discrimination
Charging different prices to different demographic market segments
Senior discounts
Student discounts
Variable pricing based on stores, markets, regions, or zones (zone Pricing)
Quiz 1st, 2nd, 3rd price discrimination strategy? Coupons Rebates Senior discounts Price-bundling Multi-unit pricing Auction biding Student discounts Promotional markdowns Zone pricing
Coupons 2ND Rebates 2ND Senior discounts 3RD Price-bundling 2ND Multi-unit pricing 2ND Auction biding 1ST Student discounts 3RD Promotional markdowns 2ND Zone pricing 3RD
Leader Pricing
Certain items are priced lower than normal
- To increase customers traffic flow
- To boost sales of complementary products
Examples: Eggs, bread, milk
Price Lining
A limited number of predetermined price point
(e.g.) Banana Republic – All sweaters @ $59.50; $69.50; $79.50; $89.50
Benefits: eliminates confusion of many prices
Merchandising task is simplified
Gives buyers flexibility
Odd Pricing
A price that ends in an odd number (e.g., $5.99) or just under a round number (e.g., $2.96).
Predatory Pricing
A market-dominating firm charges below-cost prices for some goods or in some areas in order to drive out competition from the marketplace
Horizontal Price Fixing
Agreements between retailers that are in direct competition to have the same prices
Illegal
Bait-and-Switch
Lure customers into store by advertising a product at a lower than usual price (the bait) and then induces customer to switch to higher-priced model (the switch)
Illegal
