Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Pricing Objectives and
Policies
Text © The McGraw−Hill
Companies, 2002500 Chapter 17
retailers pay a percent of the revenue from each credit sale for this service—from
1 to 7 percent depending on the card company and the store’s sales volume. For
this reason, some retailers offer discounts to consumers who pay cash.
Many consumers like the convenience of credit card buying. But some critics
argue that the cards make it too easy for consumers to buy things they really can’t
afford. Further, because of high interest charges, credit card buying can increase the
total costs to consumers.A trade (functional) discountis a list price reduction given to channel members
for the job they are going to do.
A manufacturer, for example, might allow retailers a 30 percent trade discount
from the suggested retail list price to cover the cost of the retailing function and
their profit. Similarly, the manufacturer might allow wholesalers a chaindiscount of
30 percent and 10 percent off the suggested retail price. In this case, the whole-
salers would be expected to pass the 30 percent discount on to retailers.^18A sale priceis a temporary discount from the list price. Sale price discounts
encourage immediate buying. In other words, to get the sale price, customers give
up the convenience of buying when they want to buy and instead buy when the
seller wants to sell.
Special sales provide a marketing manager with a quick way to respond to chang-
ing market conditions—without changing the basic marketing strategy. For
example, a retailer might use a sale to help clear extra inventory or to meet a com-
peting store’s price. Or a producer might offer a middleman a special deal—in
addition to the normal trade discount—that makes it more profitable for the mid-
dleman to push the product. Retailers often pass some of the savings along to
consumers.
In recent years, sale prices and deals have become much more common. At first
it may seem that consumers benefit from all this. But prices that change constantly
may confuse customers and erode brand loyalty.
To avoid these problems, some firms that sell consumer convenience products
offer everyday low pricing—setting a low list price rather than relying on a highTrade discounts often
are set by tradition
Special sales reduce
list prices—temporarily
Many stores guarantee that they
have the lowest price and
promise a refund if a customer
finds an item lower somewhere
else. Sun Television and
Appliances woos customers to its
stores with automatic refunds.
Sun hires an outside firm to do
daily price checks. When a
customer is due a refund, it is
sent automatically.