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

510 Chapter 17

The need for such a rule is clear—once you try to control price discrimination.

Allowances for promotion aid could be granted to retailers or wholesalers without

expecting that any promotion actually be done. This plainly is price discrimination

in disguise.^30

Because price discrimination laws are complicated and penalties for violations

heavy, many business managers deemphasize price as a marketing variable. They fol-

low the safest course by offering few or no quantity discounts and the same

cost-based prices to allcustomers. This is tooconservative a reaction. But when firms

consider price differences, they may need a lawyer involved in the discussion!

How to avoid
discriminating

Conclusion

The Price variable offers an alert marketing manager
many possibilities for varying marketing mixes. What
pricing policies should be used depends on the pricing
objectives. We looked at profit-oriented, sales-oriented,
and status quo-oriented objectives.
A marketing manager must set policies about price
flexibility, price levels over the product life cycle, who
will pay the freight, and who will get discounts and
allowances. While doing this, the manager should be
aware of legislation that affects pricing policies.
In most cases, a marketing manager must set prices—
that is, administer prices. Starting with a list price, a

variety of discounts and allowances may be offered to

adjust for the something of value being offered in the

marketing mix.

Throughout this chapter, we talk about what may be

included or excluded in the something of value and

what objectives a firm might set to guide its pricing

policies. We discuss how pricing policies combine to

impact customer value. Price setting itself is not dis-

cussed. It will be covered in the next chapter—where

we show ways to carry out the various pricing objec-

tives and policies.

Questions and Problems

1. Identify the strategy decisions a marketing manager
   must make in the Price area. Illustrate your answer
   for a local retailer.


2. How should the acceptance of a profit-oriented, a
   sales-oriented, or a status quo-oriented pricing ob-
   jective affect the development of a company’s
   marketing strategy? Illustrate for each.


3. Distinguish between one-price and flexible-price
   policies. Which is most appropriate for a hardware
   store? Why?


4. What pricing objective(s) is a skimming pricing
   policy most likely implementing? Is the same true
   for a penetration pricing policy? Which policy is
   probably most appropriate for each of the following
   products: (a)a new type of home lawn-sprinkling
   system, (b)a skin patch drug to help smokers quit,
   (c)a DVD of a best-selling movie, and (d)a new
   children’s toy?


5. How would differences in exchange rates between
   different countries affect a firm’s decisions concern-

ing the use of flexible-price policies in different

foreign markets?

6. Are seasonal discounts appropriate in agricultural
   businesses (which are certainly seasonal)?


7. What are the effective annual interest rates for the
   following cash discount terms: (a)1/10, net 20; (b)
   1/5, net 10; and (c)net 25?


8. Do stocking allowances increase or reduce con-
   flict in a channel of distribution? Explain your
   thinking.


9. Why would a manufacturer offer a rebate instead of
   lowering the suggested list price?


10. How can a marketing manager change a firm’s
    F.O.B. terms to make an otherwise competitive mar-
    keting mix more attractive?


11. What type of geographic pricing policy is most ap-
    propriate for the following products (specify any
    assumptions necessary to obtain a definite answer):
    (a)a chemical by-product, (b)nationally advertised
    candy bars, (c)rebuilt auto parts, and (d)tricycles?