Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

17. Pricing Objectives and
    Policies

Text © The McGraw−Hill

Companies, 2002

Pricing Objectives and Policies 505

by the right quality goods and services. Rather, the focus is on the customer’s

requirements and how the whole marketing mix meets those needs.

Toyota is a good example of a firm that has been effective with value pricing. It

has different marketing mixes for different target markets. But from the low-price

Echo to the $30,000 Avalon, the Japanese automaker consistently offers better qual-

ity and lower prices than its competitors. Among discount retailers, Wal-Mart is a

value pricing leader. Its motto, “the low price on the brands you trust,” says it all.

In the product-market for hosiery, Sara Lee is a value pricer; its L’eggs are priced

lower than many dealer brands, but it still offers customers the selection, fit, and

wear they want.

These companies deliver on their promises. They try to give the consumer pleas-

ant surprises—like an unexpected service—because it increases value and builds

customer loyalty. They return the price if the customer isn’t completely satisfied.

They avoid unrealistic price levels—prices that are high only because consumers

already know the brand name. They build relationships so customers will come back

time and again.

Some marketing managers miss the advantages of value pricing. They think that

in mature markets there is no alternative but to set a price level that is the same as

or lower than competitors. They’ve heard economists say that in perfect competition

the market sets the price and that it’s foolish to offer products above or below the

market price. The economists are right about perfect competition—when everything

but price is really the same and pricing needs to be on a tit-for-tat basis. But most

firms don’toperate in perfect competition.

Most operate in monopolistic competition, where products and whole marketing

mixes are not exactly the same. This means that there are pricing options. At one

extreme, some firms are clearly above the market—they may even brag about it.

Tiffany’s is well known as one of the most expensive jewelry stores in the world.

Other firms emphasize below-the-market prices in their marketing mixes. Prices

offered by discounters and mass-merchandisers, such as Wal-Mart and Tesco, illus-

trate this approach. They may even promote their pricing policy with catchy slogans

like “guaranteed lowest prices” or “we’ll beat any advertised price.”

There are Price choices

in most markets

Marketers for Luvs diapers want

consumers to know that Luvs’

value price, compared to the

pricey brands, is equivalent to

getting 275 diapers a year for

free.