Dollinger index

Marketing the New Venture 221

fixing. Although entrepreneurs are expected to make pricing decisions independently,

market research into competitors’ prices and signaling through price changes are legal.^20

The Federal Trade Commission regulates pricing practices and prohibits deceptive

pricing. Deceptive pricing occurs when it is difficult or impossible for the buyer to actu-

ally understand what the price of a product or service is. Some products, like insurance,

are complicated by nature and require simplified explanations of price policy. The Truth

in Lending Actrequires lenders to explain the true price of credit (interest and finance

charges) to borrowers.

The Robinson-Patman Actand the Clayton Actprohibit discriminatory pricing.

Illegal price discrimination exists when identical products or services are sold, under

similar circumstances, at different prices to different customers or to different market

segments. What actually constitutes discrimination is the subject of many volumes of

legal text, briefs, torts, and statutes. Basically, however, the following tenets of price dis-

crimination are established:

1. Different prices cannot be charged based on buyers’ membership in social, ethnic,
   or religious groups.


2. Socioeconomic factors such as age, income, and gender may not be used as a basis
   for price discrimination.

Approach

Bundling

Unbundling

Trial pricing

Value-added pricing

Twofers

Pay one price

Constant promotional price

Pricing tied to variable

Captive pricing

Fixed, then variable

Price point breaks
(psychological)

Description

Sell complementary products

Divide products into separate

elements

Introductory sizes and short trial

periods

Include “free” services to appeal

to bargain hunters

Buy one, get one free

Fixed-cost admissions or club

memberships

List price is never charged

Set a “price per” schedule

Lock the customer into a system

with one inexpensive compon-

ent, one expensive

A “just to get started” charge,

followed by a different rate

Price just below psychological

threshold

Examples

Contact lens and solution in a

single package

iPod accessories and add-ons

Starter memberships; preview

fees

Free service contract for

durables

Pizzas, theater tickets,

companion fares

Amusement park rides, salad

bars, all-you-can-eat buffets

Consumer electronics, auto

sticker prices

Steak by the ounce in

restaurants

Razors and razor blades

Taxi fares, phone calls tied to

usage

Charge $4.99 instead of $5.00

TABLE 6.4 A Creative Pricing Primer: Approaches and Examples

SOURCE: Adapted from M. Mondello, “Naming Your Price,” Inc., July 1992: 80-83.