Pricing Objectives

Major objectives

• Survival
• Short run (current) profit maximization
• Make a target profit (satisficing)
• Maximize market share
• Assume a product quality position

Minor objectives

• Discourage competition
• Stabilize parket prices
• Keep channel members happy
• Self regulate to avoid government regulation

Psychological aspects of price

• Perceived value
• Perceived price
• Price and Quality --- sss
  • Price as a signal for quality
  • Price as a surrogate for quality
  • Price as a symbol of prestige

Pricing Tactics

• Odd pricing
• Customary pricing
• Price lining (distinct price segments)

Price of freight

• FOB pricing (Free on board) customer absorbs all shipping
• Uniform delivered -- same price to all customers
• Zone pricing -- cost of shipping to zones like UPS or USPS
• Base point pricing -- charged as if it came from some base
• Freight absorbtion (may be illusory) -- no "freight charges"

Competition based pricing

• Going rate
• follow the leader
• Sealed bid

Price changes

• in response to environment
• in response to competition
  • Buyer reactions
  • Competititor reactions

Cost based pricing

• Most common
• Easiest to implement
• considered "Fair" to all parties
• if used throughout an industry, similar prices result (why?)
• probably not Optimal

Demand Based Pricing

• The true Marketing aproach to pricing is always demand based. The marketer attempts to set the price to the customer at the level where profits are maximized. (What did we learn in Economics?) This is always based on the perceived value of the offering to the customer. The elasticity of demand to price will determine whether that price is a high price with a low volume of sales or a low price with a high volumen of sales. Many factors affect whether the price that customers are willing to pay is the same as what a company would like to charge.

New Product Pricing

• Skimming
• Penetration