11-1

PRINCIPLES OF MARKETING
Eighth Edition
Philip Kotler and Gary Armstrong

Chapter 11

Pricing Products:
Pricing Strategies

 Copyright 1999 Prentice Hall

 Price - Quality Strategies 11-2

Price
Higher Lower
Strategy Strategy
Higher
Premium Good-Value
Quality

Strategy Strategy
Overcharging Economy
Lower

 Copyright 1999 Prentice Hall

New Product Pricing Strategies
11-3

Market Skimming Market Penetration

> Setting a High > Setting a Low
Price for a New Price for a New
Product to Product in Order
Maximize to Attract a Large
Revenues from Number of Buyers.
the Target Market. > Results in a Larger
> Results in Fewer, Market Share.
More Profitable
Sales.

 Copyright 1999 Prentice Hall

  Copyright 1999 Prentice Hall
Product-Bundle Pricing
Pricing Bundles Of Products Sold Together
i.e. Season Tickets, Computer Makers
By-Product Pricing
Pricing Low-Value By-Products To Get Rid
of Them
i.e. Lumber Mills, Zoos Product
Captive-Product Pricing
Pricing Products That Must Be Used
Mix
With The Main Product Pricing
i.e. Razor Blades, Film, Software Strategies
Optional-Product Pricing
Pricing Optional or Accessory Products
Sold With The Main Product
i.e. Car Options
Product Line Pricing
Setting Price Steps Between Product Line Items
i.e. $299, $399
11-4
Product Mix Pricing Strategies
  Copyright 1999 Prentice Hall
Trade-In Allowance
Time Seasonal Discount
Location Functional Discount
Product Form Quantity Discount
Customer Cash Discount
Segmented Discount & Allowance
Adjusting Prices to Allow Reducing Prices to Reward
for Differences in Customers, Customer Responses such as
Products, or Locations. Paying Early or Promoting
the Product.
Price Adjustment Strategies
11-5
Price-Adjustment Strategies
Price-Adjustment Strategies 11-6

Psychological Pricing • Adjusting Prices for Psychological

Effect.
• Price Used as a Quality Indicator.

Promotional Pricing • Temporarily Reducing Prices to

Increase Short-Run Sales.
• i.e. Loss Leaders, Special-Events

Geographical Pricing • Adjusting Prices to Account for the

Geographic Location of Customers.
• i.e. FOB-Origin, Uniform-Delivered,
Zone Pricing, Basing-Point, &
Freight-Absorption.
International Pricing
• Adjusting Prices for International
Markets.
• Price Depends on Costs, Consumers,
Economic Conditions & Other Factors.

 Copyright 1999 Prentice Hall

Initiating and Responding to Price 11-7

Changes
Competitor
Reactions
to Initiating
Price Price Cuts
Changes

Price
Changes
Buyer
Reactions Initiating
to Price
Price Increases
Changes

 Copyright 1999 Prentice Hall

  Copyright 1999 Prentice Hall
Launch Low-Price
“Fighting Brand”
Improve Quality Yes
& Increase Price
Can/ Should Effective
Raise Perceived Action be Taken?
No
Quality
Reduce Price
Will Lower Price
No Negatively Affect Our
Market Share & Profits?
Hold Current Price;
Continue to Monitor No Has Competitor Cut
Competitor’s Price. Price?
11-8
Price-Adjustment Strategies