Tool #2: Price

Session 6
 consumer
• Reference prices
• Price-Quality perceptions
• Pricing Cues
• Price sensitivity
• Perceived value (target costing)
 company objective
– survival
– maximize current profit
– maximize market share
– product quality leadership
 new product pricing
market skimming (rapid, slow)
market penetration (rapid, slow)

High

P
R
I
C
E

Low

Low High
ADVERTISING
life cycle stages
 product portfolio/mix

• Product line considerations

Full market coverage vs. Specialization/niche
• Optional product pricing
• Captive product pricing
• Product bundle pricing
• By-product pricing
 sales promotion
• Loss leader/signpost pricing
• EDLP
• High and low pricing
• Discounts – cash, seasonal, trade/functional,
volume/quantity
• Cash rebates
• Allowances
• Interest free or low interest rate EMI
• Long/extended payment time period, etc.
 price discrimination
1st degree: intensity of customer demand
2nd degree: quantity or volume purchased
3rd degree:
– Customer segment
– Product form
– Place/location
– Channel
– Time
Dynamic pricing
Posted prices – Yield management and
Demand based
Price Discovery – Negotiations, Group
buying, Auctions, etc.

Freemiums
GEOGRAPHICAL PRICING
 auctions and bids
• English auction
• Dutch auction
• Sealed bid
• Pricing strategy is largely determined by
decisions on MARKET POSITIONING.