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Print this chapterPricing Strategies
This text illustrates the different pricing strategies marketers use, which are observable by consumers. The firm's pricing strategy must be set to satisfy consumer needs and provide a proper financial return to the marketer.
Price Adjustments
Organizations must also decide what their policies are when it comes to makingprice adjustments, or changing the listed prices of their products. Some common price adjustments includequantity discounts, which involves giving customers discounts for larger purchases. Discounts for paying cash for large purchases and seasonal discounts to get rid of inventory and holiday items are other examples of price adjustments.
A company's price adjustment policies also need to outline the firm's shipping charges. Many online merchants offer free shipping on certain products, orders over a certain amount, or purchases made in a given time frame.FOB (free on board) originandFOB deliveredare two common pricing adjustments businesses use to show when the title to a product changes along with who pays the shipping charges.FOB (free on board) originmeans the title changes at the origin - that is, when the product is purchased - and the buyer pays the shipping charges.FOB (free on board) destinationmeans the title changes at the destination - that is, after the product is transported - and the seller pays the shipping charges.
Uniform-delivered pricing, also called postage-stamp pricing, means buyers pay the same shipping charges regardless of where they are located. If you mail a letter across town, the postage is the same as when you mail a letter to a different state.
Recall that we discussedtrade allowancesinChapter 12 "Public Relations, Social Media, and Sponsorships". For example, a manufacturer might give a retail store an advertising allowance to advertise the manufacturer's products in local newspapers. Similarly, a manufacturer might offer a store a discount to restock the manufacturer's products on store shelves rather than having its own representatives restock the items.
Reciprocal agreementsare agreements in which merchants agree to promote each other to customers. Customers who patronize a particular retailer might get a discount card to use at a certain restaurant, and customers who go to a restaurant might get a discount card to use at a specific retailer. For example, when customers make a purchase at Diesel, Inc., they get a discount coupon good to use at a certain resort. When customers are at the resort, they get a discount coupon to use at Diesel. Old Navy and Great Clips implemented similar reciprocal agreements.
A promotion that's popular during weak economic times is called a bounce back. Abounce backis a promotion in which a seller gives customers discount cards or coupons (seeFigure 15.6) after purchasing. Consumers can then use the cards and coupons on their next shopping visits. The idea is to get the customers to return to the store or online outlets later and purchase additional items. Some stores set minimum amounts that consumers have to spend to use the bounce back card.
