IBM Price Concepts and Management PDF

Pricing Concepts and Management Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stages for Establishing Prices Pride/Ferrel...

Pricing Concepts and Management Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stages for Establishing Prices Pride/Ferrell, Marketing 2020 V2, 20th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Price and Nonprice Competition Price competition – Emphasizing price as an issue and matching or beating competitors’ prices – a firm should be the low-cost seller of the product. – must have the flexibility to change prices rapidly and aggressively in response to competitors’ actions. – if competitors quickly match or beat a company’s price cuts, a price war may ensue. Nonprice competition – Emphasizing factors other than price to distinguish a product from competing brands – Non-price factors include distinctive product quality, excellent customer service, effective promotion, packaging, or other unique features. – Nonprice competition is effective only under certain conditions: o distinguish its brand through unique product features, higher product quality, effective promotion, distinctive packaging, and/or excellent customer service. o must extensively promote the brand’s distinguishing characteristics to establish its superiority and set it apart from competitors in the minds of buyers. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Discussion Activity 1 Consider the following products: a diamond ring, a haircut, and plumbing services. What are the non-price attributes of each product? How do these non-price attributes contribute to your perception of the price of the good? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Discussion Activity 1 Debrief How do organizations reinforce the focus on non-price attributes? Under what circumstances does nonprice competition work best? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Development of Pricing Objectives (1 of 4) Pricing objectives – Goals that describe what a firm wants to achieve through pricing – s an important task because they form the basis for decisions for other stages of the pricing process. – must be stated explicitly and in measurable terms and should include a time frame for accomplishing them. – must be consistent with the firm’s marketing and overall objectives because pricing objectives influence decisions in many functional areas. – can use both short- and long-term pricing objectives and can employ one or multiple pricing objectives. Survival involves temporarily setting prices low, at times below costs, in order to attract more sales. survival strategy can be useful in keeping a company afloat by increasing sales volume. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Development of Pricing Objectives (2 of 4) Profit The objective of profit maximization is rarely operational because its achievement is difficult to measure. – Profit objectives tend to be set at levels that the owners and top-level decision makers view as satisfactory and attainable. Specific profit objectives may be stated in terms of either actual dollar amounts or a percentage of sales revenues. Return on Investment Pricing to attain a specified rate of return on the company’s investment is a profit-related pricing objective. A return on investment (ROI) pricing objective generally requires some trial and error, as it is unusual for all data and inputs required to determine the necessary ROI to be available when first setting prices. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Development of Pricing Objectives (3 of 4) Market Share Market share – product’s sales in relation to total industry sales Maintaining or increasing market share need not depend on growth in industry sales: – An organization can increase market share even if industry sales are flat or decreasing. – Sales volume can increase while market share decreases if the overall market grows. Cash Flow Some companies set prices so they can recover cash as quickly as possible. – Choosing this pricing objective may have the support of a marketing manager if he or she anticipates a short product life cycle. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Development of Pricing Objectives (4 of 4) Status Quo can focus on several dimensions, such as maintaining a certain market share, meeting competitors’ prices, achieving price stability, or maintaining a favorable public image. Can reduce a firm’s risks by helping to stabilize demand for its products Can increase risk of minimizing pricing as a competitive tool, which could lead to a climate of nonprice competition Product Quality Attaining a high level of product quality is generally more expensive for the firm, as the costs of materials, research, and development may be greater. Products and brands that customers perceive to be of high quality are more likely to survive in a competitive marketplace. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Discussion Activity 2 How does a return on investment pricing objective differ from an objective to increase market share? Why must marketing objectives and pricing objectives be considered when making pricing decisions? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Discussion Activity 2 Debrief What are the challenges with return on investment pricing objectives? What are the advantages of market share pricing objectives? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Assessment of the Target Market’s Evaluation of Price The importance of price varies depending on the: – Type of product – Type of target market – Purchase situation Value combines a product’s price with quality attributes, which customers use to differentiate among competing brands. Consumers may perceive relatively expensive products to have great value if the products have desirable features or characteristics. Consumers are generally willing to pay a higher price for products that offer convenience and save time. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Activity 1 1. How much would you pay for a 12-ounce soft drink at a Vending machine? Movie theater? Supermarket? 2. How much would you pay for a steak dinner at a(n) Cafeteria-style restaurant? Elegant restaurant? Charity benefit dinner? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Demand, Cost, and Profit Relationships (1 of 2) Understanding the relationship between demand, cost, and profit is imperative. Marginal Analysis Marginal analysis examines what happens to a firm’s costs and revenues when production (or sales volume) changes by a single unit. – Fixed costs – Costs that do not vary with changes in the number of units produced or sold – Average fixed cost – The fixed cost per unit produced – Variable costs – Costs that vary directly with changes in the number of units produced or sold – Average variable cost – The variable cost per unit produced – Total cost – The sum of average fixed and average variable costs times the quantity produced – Average total cost – The sum of the average fixed cost and the average variable cost – Marginal cost (MC) – The extra cost incurred by producing one more unit of a product – Marginal revenue (MR) – The change in total revenue resulting from the sale of an additional unit of a product Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Table 12.1 Costs and Their Relationships 3 5 2 Average 4 Average 6 1 Fixed Fixed Cost Average Total Cost Total Cost 7 Quantity Cost (2) ÷ (1) Variable Cost (3) + (4) (5) × (1) Marginal Cost 1 $40 $40.00 $20.00 $60.00 $60 $10 2 40 20.00 15.00 35.00 70 2 3 40 13.33 10.67 24.00 72 18 4 40 10.00 12.50 22.50 90 20 5 40 8.00 14.00 22.00 110 30 6 40 6.67 16.67 23.33 140 40 7 40 5.71 20.00 25.71 180 Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Marginal Analysis Method for Determining the Most Profitable Price 3 2 Total 4 5 7 1 Quantity Revenue Marginal Marginal 6 Profit Price Sold (1) × (2) Revenue Cost Total Cost (3) – (6) $57 1 $ 57 $57 $60 $ 60 $–3 50 2 100 43 10 70 30 38 3 114 14 2 72 42 33* 4 132 18 18 90 42 30 5 150 18 20 110 40 27 6 162 12 30 140 22 25 7 175 13 40 180 –5 *Boldface indicates the best price–profit combination Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Demand, Cost, and Profit Relationships (2 of 2) Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Activity 3 1. Perform a breakeven analysis for a new product under the following conditions: a. Selling price: $8 b. Fixed costs (rent, salaries, utilities): $4,800/month c. Food and other variable costs: 50% of the selling price 2. If the selling price were $7, what would the breakeven point be? 3. If the selling price were $9, what would the breakeven point be? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Evaluation of Competitors’ Prices Identifying competitors’ prices should be a regular part of marketing research. Regardless of actual costs, a firm does not want to sell its product: – At a price that is significantly above competitors’ prices, because the products may not sell as well – At a price that is significantly below competitors’ prices, because customers may believe the product is of low quality In some instances, an organization’s prices are designed to be slightly above competitors’ prices to lend an exclusive image and to signal product quality to consumers. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Discussion Activity 3 Why should a marketer be aware of competitors’ prices? What are possible outcomes if an organization sets its prices slightly above the competitors’ prices? Slightly below? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Discussion Activity 3 Debrief Under what circumstances might an organization choose to set its prices higher than those of its competitors? When must an organization ensure that its prices are set the same—or lower— than its competitors’ prices? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Basis for Pricing (1 of 3) The three major dimensions on which prices can be based are cost, demand, and competition. An organization generally considers at least two, or perhaps all three, dimensions. Setting appropriate prices can be a difficult balance for firms: – A high price may reduce demand for the product. – A low price will hurt profit margins and may instill in customers a perception that the product is of low quality. Firms must weigh many different factors when setting prices, including: Consumer buying behavior Manufacturing Product life Costs Competition and price capacity cycles sensitivity Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Basis for Pricing (2 of 3) Cost-Based Pricing Cost-based pricing – Adding an amount or percentage to the cost of the product – Does not necessarily take into account the economic aspects of supply and demand, nor must it relate to just one pricing strategy or pricing objective COST-PLUS PRICING Cost-plus pricing – Adding a specified amount or percentage to the seller’s cost MARKUP PRICING Markup pricing – Adding to the cost of the product a predetermined percentage of that cost – Can be stated as a percentage of cost of making the product or as a percentage of selling price: Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Basis for Pricing (3 of 3) Demand-Based Pricing Demand-based pricing – Pricing based on the level of demand for the product – Customers pay a higher price when demand for the product is strong and a lower price when demand is weak. – Marketers must be able to estimate the quantity of a product consumers will demand at different times and how demand will be affected by changes in the price; the marketer then chooses the price that generates the highest total revenue. – Appropriate for industries in which companies have a fixed amount of available resources that are perishable – Effectiveness depends on the marketer’s ability to estimate demand accurately Competition-Based Pricing Competition-based pricing – Pricing influenced primarily by competitors’ prices – A common method among producers of relatively homogeneous products, particularly when the target market considers price to be an important purchase consideration – Firms may choose to set prices below competitors’ or at the same level Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Knowledge Check 1 Determine whether each example is based on cost-plus, markup, demand-based, or competition-based pricing. 1. Joe’s Sandwich Company determines the cost of making each sandwich and then adds a certain dollar amount to set the final price. 2. To undercut its rivals, a new furniture company prices its products below competing brands. 3. Airlines often price their tickets higher on the weekend because more people are purchasing tickets. 4. Costco and Sam’s Club add 14 percent of the cost to set the price. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Pricing Strategies Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (1 of 10) New-Product Pricing PRICE SKIMMING Price skimming – Charging the highest possible price that buyers who most desire the product will pay – Some consumers are willing to pay a high price for an innovative product, either because of its novelty or because of the prestige or status that ownership confers. – Provides the most flexible introductory base price Benefits Dangers Helps a firm recover the high costs of Makes the product appear more research and development (R&D) lucrative than it is to potential more quickly competitors May hold down demand in instances Firm risks misjudging demand and where the firm’s production capacity is facing insufficient sales at the higher limited during the introduction stage price Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (2 of 10) PENETRATION PRICING Penetration pricing – Setting prices below those of competing brands to penetrate a market and gain a significant market share quickly Advantages: Disadvantages: If the price stimulates sales, longer Places a firm in a less-flexible pricing production runs may increase position economies of scale with decreased More difficult to raise prices production costs per unit significantly than it is to lower them If marketer can gain a large market share quickly, competitors may be discouraged from entering the market Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (3 of 10) Differential Pricing An important issue in pricing decisions is whether to use a single price or different prices for the same product. – A single price is easily understood by both employees and customers. – Because many salespeople and customers dislike negotiating prices, having a single price reduces the risk of a marketer developing an adversarial relationship with customers. Differential pricing – Charging different prices to different buyers for the same quality and quantity of product – For differential pricing to be effective, the market must consist of multiple segments with different price sensitivities. – Caution should be used to avoid confusing or antagonizing customers. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (4 of 10) NEGOTIATED PRICING Negotiated pricing – Establishing a final price through bargaining between seller and customer SECONDARY-MARKET PRICING Secondary-market pricing – Setting one price for the primary target market and a different price for another market PERIODIC DISCOUNTING Periodic discounting – Temporary reduction of prices on a patterned or systematic basis – Customers can predict when the reductions will occur and may delay their purchases; less effective in an environment where many consumers easily comparison shop for a better deal online RANDOM DISCOUNTING Random discounting – Temporary reduction of prices on an unsystematic basis Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (5 of 10) Psychological Pricing Psychological pricing – Strategies that encourage purchases based on consumers’ emotional responses, rather than on economically rational ones – Used primarily for consumer products rather than business products ODD-NUMBER PRICING Odd-number pricing – The strategy of setting prices using odd numbers that are slightly below whole-dollar amounts – This strategy is not limited to low-price items. – Odd-number pricing has been the subject of various psychological studies, but the results have been inconclusive. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (6 of 10) MULTIPLE-UNIT PRICING Multiple-unit pricing – The strategy of setting a single price for two or more units – Can increase sales by encouraging consumers to purchase multiple units when they might otherwise have only purchased one at a time REFERENCE PRICING Reference pricing – Pricing a product at a moderate level and positioning it next to a more expensive model or brand Used in the hope that the customer will use the higher price as a reference price (i.e., a comparison price) – Because of the comparison, the customer is expected to view the moderate price more favorably than he or she would if the product were considered in isolation. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (7 of 10) BUNDLE PRICING Bundle pricing – Packaging together two or more complementary products and selling them for a single price – The single price generally is markedly less than the sum of the prices of the individual products. EVERYDAY LOW PRICES (EDLPs) Everyday low prices (EDLPs) – Setting a low price for products on a consistent basis – EDLPs are set low enough to make customers feel confident they are receiving a good deal. – A major issue with this approach is that, in some instances, customers believe that EDLPs are a marketing gimmick and not truly the good deal that they proclaim. CUSTOMARY PRICING Customary pricing – Pricing on the basis of tradition – Example: 25-cent gumballs sold in gumball machines Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (8 of 10) Product-Line Pricing Product-line pricing – Establishing and adjusting prices of multiple products within a product line CAPTIVE PRICING Captive pricing – Pricing the basic product in a product line low, but pricing related items at a higher level PREMIUM PRICING Premium pricing – Pricing the highest-quality or most versatile products higher than other models in the product line PRICE LINING Price lining – The strategy of selling goods only at certain predetermined prices that reflect definite price breaks Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (9 of 10) Promotional Pricing PRICE LEADERS Price leaders – Products priced below the usual markup, near cost, or below cost – Used in supermarkets and restaurants to attract customers by offering them especially low prices on a few items, with the expectation that they will purchase other items as well – Management expects that sales of regularly priced products will more than offset the reduced revenues from the price leaders. SPECIAL-EVENT PRICING Special-event pricing – Advertised sales or price cutting linked to a holiday, season, or event – Used to increase sales volume – Special sales events may be designed to generate necessary operating capital. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of a Pricing Strategy (10 of 10) COMPARISON DISCOUNTING Comparison discounting – Setting a price at a specific level and comparing it with a higher price – The higher price may be the product’s previous price, the price of a competing brand, the product’s price at another retail outlet, or a manufacturer’s suggested retail price. Because this pricing strategy can lead to deceptive pricing practices, the Federal Trade Commission has established guidelines for comparison discounting: – If the higher price is the price formerly charged for the product, the seller must have made the previous price available to customers for a reasonable time period. – If sellers present the higher price as the one charged by other retailers in the same trade area, they must be able to demonstrate that this claim is true. – When the higher price is presented as the manufacturer’s suggested retail price, the higher price must be close to the price at which a reasonable proportion of the product was sold. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Knowledge Check 2 For each example, decide the type of psychological pricing used as the pricing strategy: reference pricing, bundle pricing, multiple-unit pricing, everyday low prices (EDLP), odd-number pricing, or customary pricing. 1. Customers are so used to purchasing regular cheeseburgers for $1 at fast-food restaurants that McDonald’s maintains this price even when meat costs rise. 2. Walmart places its Great Value brand next to a competing brand that costs more to demonstrate its value. 3. To get customers to purchase more, Carl’s Jr. offers its hamburger combination meals at a lower price than what they would be if the items were bought individually. 4. Target tries to compete against Walmart by emphasizing the fact that it offers quality products at low prices. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Determination of a Specific Price A pricing strategy will yield a certain price or range of prices. – Marketers may need to refine this price in order to make it consistent with circumstances and with pricing practices in a particular market or industry. Pricing strategies should help in setting a final price. If they are to do so, marketers must: – Establish pricing objectives – Have considerable knowledge about target market customers – Determine demand, price elasticity, costs, and competitive factors The way marketers use pricing in the marketing mix will affect the final price. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Activity 4 1. Your elderly neighbor has asked you to help her clean out her attic. After you are done assisting her, she gives you a statue for helping. You thank her for the object but have no idea what it is or what it is worth. You decide to sell it but have no idea what price to charge. How can you get the most money for the statue? 2. Search for a list of possible sources of information about the value of the statue. 3. Examine your list and determine how you can set a price that gets you the most value. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Activity 4 What do marketers need to consider when developing pricing strategies? How do marketers know they have determined the right price? Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Pricing for Business Markets (1 of 2) Setting prices for business products can be quite different from setting prices for consumer products. Factors include: the size of purchases, transportation considerations, and geographic issues. Geographic Pricing Geographic pricing – Reductions for transportation and other costs related to the physical distance between buyer and seller – F.O.B. origin – The product price does not include freight charges – F.O.B. destination – The product price includes freight charges Transfer Pricing Transfer pricing – Prices charged in sales between an organization’s units – Determined by calculating the cost of the product, which can vary depending on the types of costs included in the calculations Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Pricing for Business Markets (2 of 2) Discounting Discount – A deduction from the price of an item Trade Quantity Cash Seasonal Allowance A reduction off Deductions from Incentives offered A price reduction A reduction in the list price the list price for for prompt given to buyers price to achieve a offered to purchasing in payment who purchase out desired goal marketing large quantities Example: of season Example: intermediaries or Example: Large Numerous Example: Florida Nabisco pays a middlemen department store companies hotels provide promotional Example: A chains purchase serving business companies allowance to a college bookstore some women’s markets allow a 2 holding national supermarket for pays about one- apparel at lower percent discount and regional setting up and third less for a prices than do if an account is sales meetings maintaining a new textbook individually paid within with deeply large, end-of-aisle than the retail owned specialty 10 days. discounted display for a price a student stores. accommodations 2-week period. pays. during the summer months. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Knowledge Check 3 For each example, decide which type of pricing discount is described: trade discount, quantity discount, cash discount, seasonal discount, or allowance. 1. A clothing manufacturer offers Kohl’s a discount on swimsuits at the end of the summer. 2. Apple wants a company to upgrade to a new Mac computer, so it allows the company to trade in its older Macs and get the new ones at a reduced price. 3. A warehouse is given a discount from the manufacturer for agreeing to transport the inventory using its own trucks. 4. Red Lobster receives a deduction in list price when it purchases large quantities of lobsters. 5. Lynn’s Electronics takes advantage of its supplier’s policy of giving discounts for prompt payment. Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.