Darren Kate A.

Licupa
BSTM 1

I. EVALUATION
1. Summarize your learnings on this chapter.

The pricing strategy that a company uses depends on whether its operation is in domestic
market or international market. Pricing schemes also vary depending on the type of products and the
type of market the company is catering to. The importance of Price, where price dictates product
demand. Market patronizes products because of their prices. Some factors must be considered, like
product quality and type of services given to customers by the company’s staff and price determines
the level of expenditures of the market and price influences buyers’ decision whether to buy the
product or not. The pricing strategies, Penetration pricing strategy involves setting low initial
price for new products offered in the market. The objective of penetration pricing is to be able to
enter the market immediately. Market skimming pricing strategy involves setting high initial price for a
product or services offered, and after a definite period of time, companies either lower the price of the
offering or maintain its price. Bundle pricing strategy involves setting one price for a set or
complimentary product. Geographical pricing involves setting price differently in different locations.
Producers of goods or channels of distribution like wholesalers set geographical pricing scheme due
to shipping cost or transport cost. Reasons for Price Change when there is excess capacity,
continuous decrease in market share, competitors lower their price offering and other companies
believe that it is advantageous to their companies to follow the price decrease, company desires to
regain lost market share and gain more customers and company is anticipating new product model or
design.
Target return objective has administrative advantages in a large company. Performance can
be compared against the target. Some companies eliminate divisions, or drop products, that aren’t
yielding the target rate of return . A one-price policy means offering the same price to all customers
who purchase products under essentially the same conditions and in the same quantities. A flexible-
price policy means offering the same product and quantities to different customers at different prices.
when computers are used to implement flexible pricing, the decision focus more on what type of
customer will get a price break. Dynamic pricing offers products at a price that changes according to
the level of demand, the type of customers, or the state of the weather.
A skimming price policy tries to sell the top (skim the cream) of a market- the top of the
demand curve- at a high price before aiming at more price-sensitive customers. A penetration pricing
policy tries to sell the whole market at one low price. This approach might be wise when the elite
market- those willing to pay a high price- is small. This is the case when the whole demand curve is
fairly elastic. Discounts are reductions from list price given by a seller to buyers who either give up
some marketing function or provide the functions themselves. Quantity discounts are discounts
offered to encourage customers to buy in larger amounts. Seasonal discounts are discounts offered
to encourage buyers to buy earlier than present demand requires. Cash discounts are reductions in
price to encourage buyers to pay their bills quickly. Trade (functional) discount is a list price reduction
given to channel members for the job they are going to do. Sales price is a temporary discount from
the list price. Sale price discounts encourage immediate buying.
Allowance, like discounts, are given to final consumers, business customers, or channel
members for doing something or accepting less of something. Advertising allowances are price
reductions given to firms in the channel to encourage them to advertise or otherwise promote the
supplier’s products locally. Stocking allowances- sometimes called slotting allowances- are given to
an intermediary to get shelf space for a product. For example, a producer might offer a retailer cash
or free merchandise to stock a new item. Stocking allowances are commonly used to get
supermarket chains to handle new products. Push money (or prize money) allowances- sometimes
called PMs or spiffs- are given to retailers by manufacturers or wholesalers to pass on the retailers’
salesclerks for aggressively selling certain items. A trade-in-allowance is a price reduction given for
used products when similar new products are bought. Value pricing means setting a fair price level for
a marketing mix that really gives the target market superior customer value. Value pricing doesn’t
necessarily mean cheap if cheap means bare-bones or low-grade. It doesn’t mean high prestige
either if the prestige is not accompanied by the right quality goods and services. Rather, the focus is
on the customer’s requirements and how the whole marketing mix meets those needs.