PRICE ADAPTION

STRATEGIES
PRICE ADAPTION STRATEGIES
Price adaption strategies are those that are used to
address the variations in geographical demand, costs,
market segments, purchase timing, and other factors.

1.) Geographical Pricing

2.) Price Discounts and Allowances
3.) Promotional Pricing
4.) Discriminatory Pricing
I. GEOGRAPHICAL PRICING
Geographical pricing refers to pricing decisions related to
products intended for customers in different locations. The cost of
shipping is a primary consideration which led to the following
strategies:

a.) Point-of-Production Pricing – refers to the situation where

the seller quotes the selling price at the point of production, and
the buyer selects the mode of transportation and pays all freight
costs.

b.) Under Uniform Delivered Pricing – the seller quotes to all

buyers the same delivered regardless of their locations.
c.) Zone-Delivered Pricing – the seller sets prices
that are different from zone to zone.

d.) Freight-Absorption Pricing – is that strategy

where the seller pays for some of the freight
charges in order to penetrate more distant markets.
II. PRICE DISCOUNTS & ALLOWANCES
Discounts and allowances are price modifications
designed to reward customers for early payment volume
purchase, and off-season buying.

Discounts – are reductions from the list price that are given
by sellers to buyers who either give up some marketing
function or provide the function themselves.

Allowances – are reductions in price given to final

consumers, customers or channel members for doing some
tasks or accepting less service.
1.) Cash Discounts – these are reductions in price to
encourage buyers to pay their bills.

2.) Quantity Discounts – these are reductions in unit

costs for a larger order.

3.) Functional or Trade Discounts – these are reductions

form the list price given by the manufacturer to reward
wholesalers and retailers for marketing functions they
will perform like selling, storing, and record keeping.
4.) Seasonal Discounts – these are price
reductions given to buyers who buy goods or
services out of season. This type of discounts is
designed to help the manufacturer maintain
production even during seasons of low demands.

5.) Allowances – these are reductions form list

prices to buyers for performing some activity.
 2 Types of Allowances:
Trade-in Allowance – this is a price reduction
given when used products is part of the payment
on a new product.

Promotional Allowance – this is a price

reduction granted by a seller as payment for
promotional services performed by buyers.
III. PROMOTONAL PRICING
Promotional pricing refers to the temporary
reduction of prices of a company’s products.

Sale – this is the form where the prices of the products of

the firm are reduced for a limited time.

Special Event Pricing – under this form, special prices

in certain seasons are made to draw in more customers.
Cash Rebates – these are offered to customers to
encourage them to make purchases within a specified
time period.

Low-Interest Financing – this involves low-interest

financing to customers.

Warranties & Service Contracts – these involve

adding a free warranty offer or service contract.
IV. DISCRIMINATORY PRICING
Discriminatory pricing refers to modifications of the
basic price to accommodate differences in customers,
product, and locations. The company sells its products or
service at two or more prices.

Customer Segment Pricing – different prices for the

same product or service are charged for different
customer groups.

Product Form Pricing – different product version are

priced differently without considering costs.
Image Pricing – identical products but with
different images are priced at two different levels.

Location Pricing – different locations are priced

differently even if the cost of offering each
location is the same.

Time Pricing – prices varied by season, day, or

hour.
 PRICING UNDER
VARIOUS MARKET
CONDITIONS
 Knowing the price of the competitor’s products is important
but anticipating his pricing behavior may even be more
important. Economists have put forward some concepts in
market structures and how the sellers will probably behave
under various kinds of competition.

Kinds of Competitive Situations:

1. Pure Monopoly
- this is a competitive situation where there is only on seller
in a market. The monopolist enjoys a very high degree of
control over the price of his products. His only worry is pricing
too high to invite competition.
2. Oligopoly
- only a few firms compete in the sale of a commodity. These
few firms are interdependent in many of their activities including
pricing. The oligopolists would have to consider the effects of
their actions (like prices changes) on the behavior of their rivals,
where retaliation is almost certain.

3. Pure Competition
- refers to that market where there are a great numbers of
sellers and buyers. Products sold are regarded as homogenous and
the buyers will be motivated to switch from one seller to another
because of price. No seller can command a price above the one
that is prevailing.
4. Oligopsony
- only a few buyers compete in the purchase of a
commodity. This sellers are helpless in controlling the
prices of their products.

5. Monopsony
- is a competitive situation characterized by the
presence of only one buyer. The monopsonist has a very
high degree of control over the price of the commodity
he is buying.
Competitive Situation Number of Number of Degree of Over
Sellers Buyers Control Prices
Seller Buyer
Pure Monopoly One Many Very High None

Oligopoly Few Many High Very Slight

Pure Competition Many Many None None

Oligopsony Many Few Very Slight High

Monopsony Many One None Very High