Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Pricing Objectives and
Policies
Text © The McGraw−Hill
Companies, 2002492 Chapter 17
situations usually involve personal selling, not mass selling. The advantage of
flexible pricing is that the salesperson can make price adjustments—considering
prices charged by competitors, the relationship with the customer, and the cus-
tomer’s bargaining ability. Flexible-price policies often specify a rangein which the
actual price charged must fall.^11
Most auto dealers use flexible pricing. The pro-
ducer suggests a list price, but the dealers bargain
for what they can get. Their salespeople negotiate
prices every day. Inexperienced consumers, reluc-
tant to bargain, often pay hundreds of dollars more
than the dealer is willing to accept. By contrast, however, Saturn dealers have
earned high customer-satisfaction ratings by offering haggle-weary consumers a one-
price policy. CarMax has adopted the same approach with used vehicles.
Flexible pricing does have disadvantages. A customer who finds that others paid
lower prices for the same marketing mix will be unhappy. This can cause real con-
flict in channels. For example, the Winn-Dixie supermarket chain stopped carrying
products of some suppliers who refused to give Winn-Dixie the same prices avail-
able to chains in other regions of the country. Similarly, companies that post
different prices for different segments on a website that all can see often get
complaints.^12
If buyers learn that negotiating can be in their interest, the time needed for
bargaining will increase. This can increase selling costs and reduce profits.Some sales reps let price-cutting become a habit. This reduces the role of price
as a competitive tool and leads to a lower price level. It can also have a major effect
on profit. A small price cut may not seem like much; but keep in mind that all of
the revenue that is lost would go to profit. If salespeople for a producer that usually
earns profits equal to 15 percent of its sales cut prices by an average of about 5 per-
cent, profits would drop by a third!Too much price-cutting
erodes profits
To reach its objectives, Carnival
uses flexible pricing—including
discounts for retired people. By
contrast, Professional Carwashing
& Detailing,a trade magazine,
wants advertisers to know that it
charges everyone the same price
for ad space.