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

508 Chapter 17

The practical effect of these laws is to protect certain limited-line food retailers—

such as dairy stores—from the kind of “ruinous” competition supermarkets might

offer if they sold milk as a leader, offering it below cost for a long time.

The United States and most other countries control the minimum price of imported

products with antidumping laws. Dumpingis pricing a product sold in a foreign mar-

ket below the cost of producing it or at a price lower than in its domestic market.

These laws are usually designed to protect the country’s domestic producers and jobs

from foreign competitors, but there is much debate about how well they work.^25

Generally speaking, firms can charge high prices—even outrageously high

prices—as long as they don’t conspire with their competitors to fix prices, discrim-

inate against some of their customers, or lie.

Of course, there are exceptions. Firms in regulated businesses may need to seek

approval for their prices. For example, in the United States, most states regulate

automobile insurance rates. Some countries impose more general price controls—

to reduce inflation or try to control markets. However, most countries have followed

the move toward a market-directed economy. That doesn’t mean, however, that

there aren’t important regulations in the pricing area.

Phony list pricesare prices customers are shown to suggest that the price has

been discounted from list. Some customers seem more interested in the supposed

discount than in the actual price. Most businesses, trade associations, and govern-

ment agencies consider the use of phony list prices unethical. In the United States,

the FTC tries to stop such pricing—using the Wheeler Lea Amendment,which bans

“unfair or deceptive acts in commerce.”^26

In recent years some electronics retailers, like Best Buy, have been criticized on

these grounds. They’d advertise a $300 discount on a computer when the customer

signed up for an Internet service provider, but it might not be clear to the consumer

that a three-year commitment—costing over $700—was required.

Difficulties with pricing—and violations of pricing legislation—usually occur when

competing marketing mixes are quite similar. When the success of an entire market-

ing strategy depends on price, there is pressure (and temptation) to make agreements

Even very high prices
may be OK

You can’t lie
about prices

Price fixing is illegal—
you can go to jail

Local media in China claim that
both Fuji from Japan and Kodak
from the U.S. are dumping their
products in China, even though
China’s Lucky brand of film and
paper has a price that is 50
percent lower.