PRICEFLEXIBILITY 237
PriceLines
Youacealreadyfamiliarwithpricelines.Tiesmaybepricedat $15,$ 17 , $20,and$22.50;
tluejeansmaybepricedat$30,$32.95, $37.95,and$ 45. Eachpricemustbefarenough
apar'~sothatbuyerscanseedefinite qualitydifferences amongproducts.Pricelinestend
tobeassociatedwithconsumershoppinggoodssuchasapparel,appliances, andcarpeting
ra therthanproductlinessuchas groceries.Customersdov;;rylittlecomparison-shopping
ontCJelatter.
Priceliningservesseveralpurposesthatbenefitbothbuyersandsellers. Customers
wantandexpecta wideassortmentofgoods,particularly shoppinggoods.Manysmallprice
differencesfora givenitemcanbeconfusing.Ifties werepricedat$15,$15.35, $15.75,
andsoon,selectionwouldbemore difficult;thecustomercouldnotjudgequalitydiffer-
el~cesas reflectedbysuchsmallincrements inprice.So,havingrelativelyfewpricesreduces
theconfusion.
Fromtheseller's pointofview,priceliningholdsseveralbenefits.First,it issim-
plerandmoreefficienttouserelativelyfewer prices.Theproduct/servicemix can then
betailoredtoselectedpricepoints.Pricepointsaresimplythedifferentpricesthatmake
uptheline.Second, it canre sultina smallerinventorythanwouldotherwisebethecase.
It mightincreasestockturnoverandmakeinventory controlsimpler.Third,ascostschange,
eitherincreasingordecreasingthe pricescanre main the same, butthequalityintheline
canbechanged.For example,youmayhave boughta $20 tiefifteenyearsago.You can
buya $2 0 tie today, butit is unlikelythat today's $20tieisofthesamefinequalityasit
wasinthepast.While customers arelikelyto beawareofthedifferences,theyarenev-
erthelessstillable topurchasea$20tie. Duringinflationaryperiodsthequality/pricepoint
relationshipchanges. Fromthepointofviewofsalespeople,offeringpricelineswillmake
sellingeasier.Salespeoplecaneasilylearna smallnumberofprices.This reducesthelike-
lihoodthattheywillmisquote pricesormakeotherpricingerrors.Theirsellingeffortis
thereforemorerelaxed, andthisatmospherewillinfluencecu stomerspositively.It also
givesthesalespersonflexibility.Ifa customercan'tafforda $2,800Gatewaysy stem,the
$2,200systemis suggested.
PriceFlexibility
Anotherpricingdecisionre latestoth e extentofpriceflexibility.A flexiblepricingpolicy
meansthattheprice is bid or negotiatedseparatelyfor eachexchange. Thisis a common
practicewhensellingtoorganizationalmarketswhere each transactionistypicallyquite
large.Insuchcases,thebuyermayinitiate theprocessbyaskingforbiddingona product
orservicethatmeets certain specifications.Alternatively.abuyermayselecta supplierand
attempttonegotiatethebestpossibleprice.Marketingeffectivenessinmanyindustrialmar-
ketsrequires acertainamountofpriceflexibility.
DiscountsandAllowances
Inaddition todecisionsrelatedtothebaseprice ofproductsandservices, marketingman-
agersmustalsoset policiesre latedtotheuseofdiscounts andallowances.Therearemany
differenttypesofpricereductions-eachdesigned toaccomplisha specificpurpose.
QuantitydiscountsarereductionsinbasepricegivenastheresuLofa buyerpurchasing
somepredeterm:nedquantityof merchandise.Anoncumulativequantitydiscountapplies
