Chapter 13 Summary

This is the second chapter on pricing. Whereas the basics of pricing were introduced in chapter 12, specific pricing strategies are discussed here. It is evident that pricing objectives and strategies should follow and support the marketing objectives and strategies as developed in planning sessions. Normal pricing objectives should include:

• Segmentation and positioning objectives
• Sales and profit objectives
• Competitive objectives
• Survival objectives, and
• Social objectives

There are certain distinct pricing strategies that a firm can follow. In doing so the firm needs to adhere to the pricing process which includes: 1) set pricing objectives, 2) evaluate customer response and other pricing constraints, 3) analyze profit potential, 4) set initial price levels, and 5) make price adjustments as needed.

Pricing objectives for new products include penetration pricing (setting low prices to attract the target market) and skimming pricing (set high initial prices to recover costs before competition moves in). Pricing of existing products is somewhat different than from new products. There are a number of variables/characteristics that must be evaluated. These include the product's perishability, its distinctiveness, and the product life cycle it is in. Another pricing objective revolves around product lines instead of individual products. Product line pricing objectives can include price lining and uniform pricing.

Having set the initial price, the marketing manager must also consider how to adjust prices. There are a number of alternatives available including:

• Discount pricing
• Psychological pricing, and
• Geographic pricing

The process of setting pricing objectives becomes more complicated in the global marketplace because customers may perceive value differently country by country. Additionally, marketing managers must take into account the country's economic environment, the political and legal environment, the costs of doing business overseas, and expectations of foreign or international channel members.

If the above mentioned topics are not enough to worry about, the marketing manager must also be able to evaluate and control pricing. To accomplish this, competitor and customer responses must be followed and evaluated. Additionally, the marketing manager must be able to control pricing levels by knowing when prices must be changed and ensuring that the changes do not lead to price discrimination.