248 CHAPTER 9 PRICINGTHEPRODUCT
Summary
Thechapterbeginsbydefiningpricefromtheperspectiveoftheconsumer,society,andthebusiness.
Eachcontributestoourunderstandingofpriceandpositionsitas a competitiveadvantage.
Theobjectivesofpricearefivefold:(1)survival,(2)profit,(3)sales,(4)marketshare,and(5)
image.Inaddition,a pricingstrategycantargetto:meetcompetition,priceabovecompetition,and
pricebelowcompetition.
Severalpricingtacticswerediscuss ed.Theyincludenewproductpricing,pricelining, price
flexibility,price bundling, andthepsychologicalaspectsofpricing.
Thechapterconcludes witha descriptionofthethreealternativeapproachestopricing: cost-
oriented,demand-oriented,andvalue-based.Marketer's Vocabulary
Demandcurve Quantitydemandedatvariouspricelevels.Nonpricecompetition Organizationuses strategiesotherthanpricetoattractcustomers.
Pricewar Pricingsignificantlylowerthancompetition.
Penetrationpricing Acceptinga lowerprofitmarginduringtheintroductionofa product.
Priceskimming Priceset relativelyhighto generatea highprofitmargin.
Pricelining Sellinga productwithseveralpricepoints.
Quantitydiscounts Reductioninbasepricegivenastheresultofa buyerpurchasingsomepre-
determinedquantityofmerchandise.
Seasonaldiscounts Pricediscountgivenonout-of-seasonmerchandise.
Cashdiscounts Reductiononbaseprice giventocustomers forpaying cash orpaying withina
shortperiodoftime.
Tradediscount Pricereductionsgiventomiddlementoencouragethemtostockandgivepre-
ferred treatmenttoanorganization'sproduct.
Spiffs Prize moneygiventoretailerstopassontotheretailer'ssalespersonnel forsellingce11ain
items.
Pricebundling Grouping similarcomplementaryproductsandcharginga totalpricethatis
lowerthanif theyweresoldseparately.
Mark-up Differencebetweentheaveragecostandpriceofa product.
Break-evenprice Price thatwillproduceenoughrevenueto coverallcostsata givenlevelof
production.Value-basedpricing Whatthat productisworthtothatcustomeratthatpointintime.DiscussionQuestions
1.Whyispriceanimportantpal1ofthemarketingmix?
2.Whotypicallyhasre sponsibilityforsettingpricesinmost organizations?Why?
3.Discusstheobjectiveswhichpricingpoliciescanbeestablishedtoaccomplish.