Essentials of Marketing, 8th Edition

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Chapter 16 Pricing Objectives and Policies
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Chapter 16 Objectives
When you finish this chapter, you should

• 1. Understand how pricing objectives should guide
  strategy planning for pricing decisions.
• 2. Understand choices the marketing manager must
  make about price flexibility.
• 3. Know what a marketing manager should consider
  when setting the price level for a product in the
  early stages of the product life cycle.
• 4. Understand the many possible variations of a
  price structure including discounts, allowances,
  and who pays transportation costs.

• 5. Understand the value pricing concept and its
  role in obtaining a competitive advantage and
  offering target customers superior value.
• 6. Understand the legality of price level and
  price flexibility policies.
• 7. Understand the important new terms.

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Strategy Planning for Price
Pricing objectives
Geographic term who pays transportation and how
Discounts and allowances to whom and when
Price levels over product life cycle
Price flexibility
Exhibit 16-1
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Pricing Objectives
Exhibit 16-4
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Price Flexibility Policies

• One-price policy
• The same price to all customers who purchase
  products under essentially the same conditions
  and quantities
• Exchange rate changes may make this difficult in
  international markets
• Flexible pricing (e.g., in channels, business
  markets, expensive consumer shopping products)
• Issues
• Use is increasing because of impact of
  information technology, customer databases,
  scanners, etc.
• Selling costs may be higher if prices are
  negotiated
• Signals to competitors
• Customer dissatisfaction may be a problem
• Gray channels and cross-shipping

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Price Level Policies
Exhibit 16-5A
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Price Level Policies
Exhibit 16-5B
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Discount Pricing
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Allowances
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Geographic Pricing Policies
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Value Pricing
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Key Terms
Discounts Quantity Cumulative
Noncumulative Seasonal Net Cash Discounts 2/10
Net 30 Trade (Functional) Discounts Sale
Price Everyday Low Pricing Allowances Advertising
Stocking Push Money Trade-in Coupons
Price Target Return Objective Profit
Maximization Objective Sales-Oriented
Objective Status Quo Objectives Nonprice
Competition Administered Price One-Price
Policy Flexible-Price Policy Skimming Price
Policy Penetration Pricing Policy Introductory
Price Dealing Basic List Prices
Rebates F.O.B. Zone Pricing Uniform
Delivered Freight Absorption Value Pricing
Unfair Trade Practices Act Dumping Phony List
Prices Wheeler Lea Act Price Fixing Robinson-Patma
n Act Price Discrimination
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