Marketing Essentials

Chapter 26: Pricing Strategies

Chapter Summaries

Section 26.1

• Establishing a base price for a product can be accomplished by using cost-oriented, demand-oriented, or competition-oriented pricing methods, or a combination of these methods. Manufacturers also consider the prices they will charge resellers in order to set a base price.
• Businesses must decide whether to use a one-price policy or a flexible-price policy.
• The product life cycle needs to be considered in the pricing process. The pricing strategy will change as the product goes through the introduction, growth, maturity, and decline stages. Two pricing strategies for the introduction of a product are skimming pricing and penetration pricing.

Section 26.2

• Once a base price is established, price adjustments are made with the use of pricing strategies. These strategies include product mix pricing, geographical pricing, international pricing, segmented pricing, psychological pricing, and promotional pricing, as well as discounts and allowances.
• There are six steps in the process of determining a price: establishing pricing objectives, determining costs, estimating demand, studying competition, deciding on a strategy, and setting the actual price.
• Technology such as computer software and the Internet has revolutionized the way businesses make pricing decisions and adjustments to prices.