Professors on the Go!

Chapter 9Pricing: Understanding and Capturing Customer Value

1. Key ConceptsThe difficult pricing decisionInternal factors affecting pricingExternal factors affecting pricing

The chapter points out that many companies do not handle pricing well. Beyond focusing too much on cost, what are some of the other difficulties that marketers have in setting prices?

What can you infer about the firm’s marketing objectives, mix strategy, and costs based on the following positioning statement: “No one beats our prices. We crush the competition.”

Interview a local business about their pricing philosophy and/or strategy. Use their terms and then apply what you have learned from them to assess their approach to those described in the text. What are the similarities and differences? How successful do the strategies appear to be? How did you make this judgment?

Use the local newspaper to compare grocery store ads for price specials. What can you determine about the competitors’ pricing strategies? How many of the techniques from the chapter do the organizations seem to be using? What strategy appears to be the most successful? How did you make this judgment?

How do companies create pricing objectives? What are the primary pricing objectives?

2. Key ConceptsCost-based pricingValue-based pricingCompetition-based pricing

What is target costing? In what product do you believe this approach would be most powerful?

Explain why the elasticity of demand is such an important concept to marketers who market a “commodity-type” product?

Cost-plus-pricing and target-profit-pricing are two different types of cost-based pricing. Explain the differences between these two methods. Which of these methods is a better tool for marketers?

According to the text, the pricing challenge for many businesses is to find ways to maintain the company’s pricing power. What does this mean? What are some of the ways that pricing can be increased?

What is the advantage of break-even pricing? What is EDLP? What are the primary methods of competition-based pricing?

3. Key Concepts

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Professors on the Go!

Market-skimming and penetration pricingProduct mix pricing strategies

What market conditions would discourage a company from using a penetration-pricing strategy to enter a market?

Automobile companies use optional-product pricing. In what other product categories do companies use this pricing strategy?

Cell phone companies use a two-part pricing strategy. From a consumer’s perspective, is there a better pricing strategy? What is it? Explain.

Write a short position paper that supports either market skimming or market penetration strategies. Be sure to demonstrate why your chosen alternative is superior to the other pricing strategy (either market skimming or market penetration).

4. Key ConceptsPrice-adjustment strategiesInitiating and responding to price changes

Psychological pricing is a pricing-adjustment strategy often used by retailers. Explain this pricing strategy. How it is tied to the concept of reference prices?

Promotional pricing generates a sense of urgency and excitement. However, recognizing the dangers of this pricing approach, your boss has requested you to design an alternative pricing strategy that will generate the greater long-term sales and customer loyalty. What pricing strategy do you recommend? Will this strategy work as well as promotional pricing in the short term? Explain.

Provide an illustration of each of the geographical pricing situations. Which is used most often in delivering products sold via the Internet?

5. Key ConceptsPricing within channel levelsPricing across channel levels

Lawful price discrimination by sellers is a common practice. Discuss the conditions under which this price discrimination practice becomes unlawful.

Find several examples where a retail outlet charges less than the manufacturer’s suggested price. Why would they do that? Can you find any examples of retailers charging more than the suggested price? How would a manufacturer react to each of these scenarios?

What are the chief features of the Robinson-Patman Act?

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