For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Chapter 17: Pricing Objectives and Policies

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Strategic Planning for Price Pricing objectives Target Market PricePromotionPlaceProduct Geographic terms— who pays transportation and how Discounts and allowances— to whom and when Price levels over product life cycle Price flexibility 17-2 Exhibit 17-1

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Pricing Objectives 17-3 Dollar or Unit Sales Growth Growth in Market Share Target Return Maximize Profits Meeting Competition Nonprice Competition Pricing Objectives Sales Oriented Profit Oriented Status Quo Oriented Exhibit 17-4

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. 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 17-4

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited Price Level Policies “Skim the cream” pricing involves selling at a high price to those who are willing to pay before aiming at more price-sensitive consumers. Price Quantity Initial skimming price Second price Final price Skimming Pricing Sell at high price before reducing to next price level and repeat

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Price Quantity Penetration Pricing Whole market price Penetration pricing involves selling the whole market at one low price Price Level Policies

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Trade Quantity Seasonal Discount Pricing Sale Cash 17-7 Discount Pricing

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Allowances Common Kinds of Allowances Advertising Allowance Push Money Allowance Trade-In Allowance Stocking Allowance 17-8

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Geographic Pricing Policies Common Geographic Pricing Policies F.O.B. Uniform Delivered Freight Absorption Zone 17-9

For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited Value Pricing Fits with Strategy Planning Fits with Strategy Planning Target Market and Competition Target Market and Competition Focus on Customer Requirements Focus on Customer Requirements $ $