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Lamb, Hair, McDaniel

Lamb, Hair, McDaniel. CHAPTER 20. Setting the Right Price. How to Set a Price on a Product or Service. Establish pricing goals. Estimate demand, costs, and profits. Choose a price strategy. Fine tune price with pricing tactics. Results lead to the right price. High $.

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Lamb, Hair, McDaniel

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  1. Lamb, Hair, McDaniel CHAPTER 20 Setting the Right Price

  2. How to Set a Price on aProduct or Service Establish pricing goals Estimate demand, costs, and profits Choose a price strategy Fine tune price with pricing tactics Results lead to the right price

  3. High $ Choose aprice strategy Low $ Evaluateresults Fine-tunebase price Set price$x.yy Setting the Right Price Establishprice goals Estimate demand,costs, and profits Skimming Status quo Penetration

  4. Profit-Oriented Establish Pricing Goals Sales-Oriented Status Quo

  5. Choose a Price Strategy Price Skimming A firm charges a high introductory price, often coupled with heavy promotion. A firm charges a relatively low price for a product initially as a way to reach the mass market. Penetration Pricing Status Quo Pricing Charging a price identical to or very close to the competition’s price.

  6. The Legality of Price Strategy Unfair Trade Practices Price Fixing Price Discrimination Predatory Pricing

  7. Price Discrimination • There must be price discrimination. • Transaction must occur in interstate commerce. • Seller must discriminate by price among two or more purchasers. • Products sold must be commodities or tangible goods. • Products sold must be of like grade and quality. • There must be significant competitive injury. The Robinson-Patman Act of 1936:

  8. The practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market. Predatory Pricing Predatory Pricing

  9. Discounts Geographic pricing Special pricing tactics Tactics for Fine-Tuning the Base Price

  10. Quantity Discounts Promotional Allowances Cash Discounts Rebates Functional Discounts Zero Percent Financing Seasonal Discounts Value-Based Pricing Discounts, Allowances, Rebates, and Value-Based Pricing

  11. Value-Based Pricing Setting the price at a level that seems to the customer to be a good price compared to the prices of other options. Value-BasedPricing

  12. FOB Origin Pricing The buyer absorbs the freight costs from the shipping point (“free on board”). Uniform Delivered Pricing The seller pays the freight charges and bills the purchaser an identical, flat freight charge. Zone Pricing The U.S. is divided into zones, and a flat freight rate is charged to customers in a given zone. Freight Absorption Pricing The seller pays for all or part of the freight charges and does not pass them on to the buyer. Basing-Point Pricing The seller designates a location as a basing point and charges all buyers the freight costs from that point. Geographic Pricing

  13. Single-Price Tactic All goods offered at the same price Flexible Pricing Different customers pay different price Professional Services Pricing Used by professionals with experience, training or certification Price Lining Several line items at specific price points Leader Pricing Sell product at near or below cost Bait Pricing Lure customers through false or misleading price advertising Odd-Even Pricing Odd-number prices imply bargain Even-number prices imply quality Price Bundling Combining two or more products in a single package Two-Part Pricing Two separate charges to consume a single good Other Pricing Tactics

  14. Pricing Tactics ConsumerPenalties Other Tactics Discounts Geographic Quantity• cumulative• noncumulative FOBorigin Single price Flexible Cash Uniformdelivered Professionalservices Functional(trade) Price lining Zone Seasonal Leader Promotional(trade) Freightabsorption Bait Rebate Basing-point Odd–even 0% Financing Bundling Value-based Unbundling Two-part Fine-Tuning the Base Price

  15. Inflation Recession Contract product lines Value-based Bundling Price Cost-oriented tactics Unbundling Escalatorpricing New products Product Select demand New product categories Demand-oriented tactics Unique offering Renegotiate contracts Change package design Offer help Suppliers Keep pressure on suppliers Increase buyer dependence Reduce number of suppliers Pricing During Inflation and Recession Delayed-quotation pricing

  16. Ch 20 Discussion Questions Describe the procedure for setting the right price in marketing. Explain the four major legal and ethical concerns in pricing decisions. What is pricing tactics? Explain how discounts, geographic pricing, and other special pricing tactics can be used to fine-tune the base price. Explain how pricing decisions change during periods of inflation and recession.

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