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Chapter 7 - Pricing Strategies and Policies

This document summarizes various pricing strategies and policies that companies use: - Market skimming sets an initially high price before competitors enter the market, while penetration pricing uses a low introductory price to compete in an established market. - Leader pricing generates store traffic and additional purchases, while psychological pricing uses prices like $9.99 that seem lower than they are. - Additional factors like laws, marketing boards, product positioning, and consumer demand also influence pricing. Variable costs depend on quantity sold while fixed costs remain constant.

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Neha Sabharwal
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37 views4 pages

Chapter 7 - Pricing Strategies and Policies

This document summarizes various pricing strategies and policies that companies use: - Market skimming sets an initially high price before competitors enter the market, while penetration pricing uses a low introductory price to compete in an established market. - Leader pricing generates store traffic and additional purchases, while psychological pricing uses prices like $9.99 that seem lower than they are. - Additional factors like laws, marketing boards, product positioning, and consumer demand also influence pricing. Variable costs depend on quantity sold while fixed costs remain constant.

Uploaded by

Neha Sabharwal
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter 7 - Pricing Strategies and

Policies
 Market skimming - setting an
initially high price for a product
before competitors enter the
market.
Penetration Pricing - setting a
low price when a product is
introduced to help it compete in
an established market.
Competitive Pricing - products
in a particular category match or
follow the price of their
competitors very closely.
Pricing Policies

Leader Pricing - this is used to generate traffic in the store and encourage shoppers to purchase
other products.
Price Lining - this puts all the products that are one price in one place. Signs are usually placed to
show that all items are a certain price on that rack.
Everyday low price - used in some discount stores like Walmart or Zellers as part of their image.
Super Sizing - adding a low cost to a product to increase its selling price and profitability. The
products usually cost little to make, so selling a super size at a higher cost is very profitable.
Theres also:
 Negotiated Pricing - the buyer makes an offer to purchase - like in real estate or ebay.
Interest-Free Pricing - this is the don't pay a cent kind of pricing. The consumer must have
approved credit to participate in this.
Combo Pricing - also known as bundling. This is used for food, in combo meals or electronics when
they are extra features like software.
Psychological Pricing - charging a price that is perceived to be better, like ending all prices with .99
or .88

Purchase Discounts - when better prices are given for large volume orders or for paying early.
Additional Factors Affecting Price
Laws - price fixing, bait and switch, double ticketing are all illegal in Canada
Marketing Boards - they often set the price for the product that their member
sell, such as eggs or dairy. All members of the Board pay into a fund that
provides marketing activities such as advertising or home mailings like
cookbooks. Prices are set to protect all members from competing on the basis
of price and to allow competition with foreign imports.
Product Positioning - what image does the manufacturer want for its product?
Premium pricing, discount pricing or anything in between.
Consumer Demand - A long as the consumer is willing to pay the price, the
manufacturer can charge it. This works well when there is little competition
between manufacturers.

Using the example of a t-shirt manufacturing plant:


Variable costs - are most often dependent on the quantity of goods sold. ex -
the amount of fabric, the cost of labour required for the manufacturing, the cost
of utilities.
Fixed costs - are constant, independent of sales or other variables. ex - the
pattern, the machine, the basic facility for production, insurance
 BY Justin Stroud
 and Curtis Smith

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