Pricing the Product
Read this chapter. Pricing is a difficult issue because most products will sell at some volume at just about any price level. Some customers are willing to pay almost any price for a specific product, but how many of those customers exist? Marketers could consider a value-priced model, but this may make the product's price so low that there is no way to profit. One common pricing strategy is known as "the loss leader", which involves selling one product below the cost to manufacture it to get it in customers' hands. They make up for this loss later with complementary goods. This is commonly seen in video game console sales. Console system manufacturers like Sony and Nintendo will price the system below the cost to manufacture it. Consumers adopt the systems due to the attractive price point, and the manufacturer makes up for the initial loss on the system with sales of proprietary accessories and video games.
DISCUSSION QUESTIONS
1. Why is price an important part of the marketing mix?
2. Who typically has responsibility for setting prices in most organizations? Why?
3. Discuss the objectives which pricing policies can be established to accomplish.
4. What conditions are necessary if a "pricing above the competition" strategy is to be successful?
5. Discuss the alternative strategies that can be adopted in new product pricing. Under what conditions should each be used?
6. List some advantages of p:;psychological pricing. What are some of the risks?
7. What are some of the more common types of discounts and allowances and the purpose of each?
8. What is price lining? What benefits does price lining hold for customers?