11 Pricing Strategies Additional Considerations

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In the previous chapter, you learned that priceis an important marketing mix tool for both creating and capturing customer value. You explored the three main pricing strategies—customer value–based, cost-based, and competition-based pricing—and the many internal and external factors that affect a firm’s pricing decisions. In this chapter, we’ll look at some additional pricing considerations: new product pricing, product mix pricing, price adjustments, and initiating and reacting to price changes. We close the chapter with a discussion of public policy and pricing.

For openers, let’s examine Apple’s premium pricing strategy. Apple sets its prices substantially above those of even its highest-priced competitors. But Apple’s appeal to customers has never been about prices. Instead, Apple’s vision has always been to provide innovative designs and superior user experiences that make its prices secondary in the minds of customers who covet Apple products.

Photo shows the front of a tall building that houses Apple's office. Photo is taken from the ground-up.

Apple earns the premium prices it charges. Avid Apple fans have long anointed the brand as the keeper of all things cool.

Thomas Kurmeier/Getting Images

Objectives Outline

  1. Objective 11-1 Describe the major strategies for pricing new products.

  2. Objective 11-2 Explain how companies find a set of prices that maximizes the profits from the total product mix.

  3. Objective 11-3 Discuss how companies adjust their prices to take into account different types of customers and situations.

  4. Objective 11-4 Discuss the key issues related to initiating and responding to price changes.

  5. Objective 11-5 Overview the social and legal issues that affect pricing decisions.

AS THE APPLE STORY suggests, and as we learned in the previous chapter, ­pricing decisions are subject to a complex array of company, environmental, and competitive forces. To make things even more complex, a company does not set a single price but rather a pricing structure that covers different items in its line. This pricing structure changes over time as products move through their life cycles. The company adjusts its prices to reflect changes in costs and demand and to account for variations in buyers and situations. As the competitive environment changes, the company considers when to initiate price changes and when to respond to them.

This chapterexamines additional pricing approaches used in special pricing situations or to adjust prices to meet changing situations. We look in turn at new product pricing for products in the introductory stage of the product life cycle, product mix pricing for related products in the product mix, price adjustment tactics that account for customer differences and changing situations, and strategies for initiating and responding to price changes.

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