Ch 11: Pricing Strategies (Key Terms)

Market-skimming pricing (price skimming)

Setting a high price for a new product to skim maximum revenues layer by layer from customer segments in line with their willingness to pay.

Market-penetration pricing

Setting a low price for a new product in order to quickly attract buyers and gain a large market share.

Product line pricing

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices.

Optional-product pricing

The pricing of optional or accessory products along with a main product.

Captive-product pricing

Setting a price for products that must be used along with a main product, such as toner cartridges for a printer and games for a video-game console.

By-product pricing

Setting a price for by-products to help offset the costs of disposing of them and help make the main product's price more competitive.

Product bundle pricing

Combining several products and offering the bundle at a reduced price.

Discount

A straight reduction in price on purchases during a stated period of time or of larger quantities.

Allowance

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

Segmented pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Psychological pricing

Pricing that considers the psychology behind how consumer evaluate price and value, not just the economics.

Reference prices

Prices that buyers carry in their minds and refer to when they look at a given product.

Promotional pricing

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales.

Geographical pricing

Setting prices for customers located in different parts of the country or world.

FOB-origin pricing

Pricing in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Uniform-delivered pricing

Pricing in which the company charges the same delivered price, including freight, to all customers regardless of their location.

Zone pricing

Pricing in which the company sets up two or more delivery zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Basing-point pricing

Pricing in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.

Freight-absorption pricing

Pricing in which the seller absorbs all or part of the freight charges in order to get or keep the desired business.

Dynamic pricing

Adjusting prices continually to meet changing conditions and situations in the marketplace.

Personalized pricing

Adjusting prices in real time to fit individual customer needs, situations, locations, and buying behaviors.