Chapter 15

Strategic Pricing Methods

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 Learning Objectives

Learning Objective 15.1 Identify three methods that firms use to set their
prices.

Learning Objective 15.2 Describe the difference between an everyday low

pricing (EDLP) strategy and a high/low strategy.

Learning Objective 15.3 Explain the difference between a price skimming and
a market penetration pricing strategy.

Learning Objective 15.4 Identify tactics used to reduce prices to consumers.

Learning Objective 15.5 Identify tactics used to reduce prices to businesses.

Learning Objective 15.6 List the pricing practices that are illegal or unethical.

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 Pricing Strategies (1 of 2)

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 Cost-Based Methods

Cost-base pricing methods start with cost

All costs calculated on a per unit basis

Assumes costs dont vary for different levels of

production

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 Competition-Based Methods

Set prices to signal how product compares with

competitors
Premium pricing

Zillow

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 Value-Based Methods

Setting prices that

focus on the overall
value of the product

Consumer perceptions

Funny Commercial:
Beauty is Nothing without Brains

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 PROGRESS CHECK (1 of 4)

1. What are the three different considerations for

setting pricing?
2. How can you use value-based methods for
setting prices?

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 Pricing Strategies (2 of 2)

Everyday low
High/Low Pricing
pricing (EDLP)

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 Everyday Low Pricing (EDLP) vs. High/Low
Pricing

Create value in different ways

EDLP saves search costs of finding lowest

overall prices

High/low provides the thrill of the chase for the

lowest price

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 Consumers Use of Reference Prices

Internal External
reference price reference price

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 New Product Pricing Strategies

Market Penetration
Pricing

Price skimming

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 PROGRESS CHECK (2 of 4)

1. Explain the difference between EDLP and

high/low pricing.
2. What pricing strategies should be considered
when introducing a new product?

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 Pricing Tactics Aimed at Consumers

Mark
downs
Leader Quantity
Pricing Discounts

Price Seasonal
Bundling Discounts

Leasing Coupons
Rebates
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 Business Pricing Tactics and Discounts

Seasonal Cash Vendor

discounts discounts Allowances

Quantity Uniform
discounts delivered vs.
Zone pricing

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 PROGRESS CHECK (3 of 4)

1. What are some consumer-oriented pricing

tactics?
2. What are some B2B-oriented pricing tactics?

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 Legal Aspects and Ethics of Pricing

Deceptive or Predatory
illegal price pricing
advertising Legal Aspects
and Ethics of
Pricing
Price Price
discrimination fixing

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 PROGRESS CHECK (4 of 4)

1. What common pricing practices are considered

to be illegal or unethical?

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 Marketing
Chapter 15
The End

The End

McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.