Chapter 17 Pricing Objectives and Policies For use

Strategic Planning for Price Target Market Product Place Promotion Price Pricing objectives Price flexibility Price levels over product life cycle Discounts and allowances— to whom and when Geographic terms— who pays transportation and how Exhibit 17 -1 17 -2 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Pricing Objectives Profit Oriented Pricing Objectives Sales Oriented Status Quo Oriented Target Return Maximize Profits Dollar or Unit Sales Growth in Market Share Meeting Competition Nonprice Competition Exhibit 17 -4 17 -3 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Price Flexibility Policies l One-price policy l The same price to all customers who purchase products under essentially the same conditions and quantities l Exchange rate changes may make this difficult in international markets l Flexible pricing (e. g. , in channels, business markets, expensive consumer shopping products) l Issues: Use is increasing because of impact of information technology, customer databases, scanners, etc. l Selling costs may be higher if prices are negotiated l “Signals” to competitors l Customer dissatisfaction may be a problem l “Gray channels” and cross-shipping l 17 -4 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Price Level Policies Skimming Price Initial skimming price Sell at high price before reducing to next price level and repeat Second price Final price “Skim the cream” pricing involves selling at a high price to those who are willing to pay before aiming at more price-sensitive consumers. Quantity 17 -5 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Price Level Policies Penetration Pricing Price Penetration pricing involves selling the whole market at one low price. Whole market price Quantity 17 -6 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Discount Pricing Quantity Seasonal Discount Pricing Sale Cash Trade 17 -7 For use with

Allowances Advertising Allowance Common Kinds of Allowances Stocking Allowance Push Money Allowance Trade-In Allowance 17 -8 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Geographic Pricing Policies F. O. B. Common Geographic Pricing Policies Zone Uniform Delivered Freight Absorption 17 -9 For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.

Value Pricing ? ? ? ? ? $ 17 -10 Focus on Customer Requirements Target Market and Competition Fits with Strategy Planning For use with Shapiro, Wong, Perreault, and Mc. Carthy texts. Copyright © 2002 Mc. Graw-Hill Ryerson Limited.