9-3
Pricing in Different Types of
Markets
Oligopolistic Competition:
Few sellers who are Pure Monopoly:
sensitive to each other’s Market consists of a
pricing/marketing strategies single seller
9-4
Demand Curve
A curve that
shows the
number of units
the market will
buy in a given
time period, at
different prices
that might be
charged.
9-5
Upward Sloping Demand Curve
9-7
Cost-Plus Pricing
• Adding a standard markup to the
cost of the product.
• Popular because:
– Sellers more certain about cost than
demand
– Simplifies pricing
– When all sellers use, prices are similar
and competition is minimized
– Some feel it is more fair to both buyers
and sellers
9-8
Break-Even Chart
9-9
Value-Based Pricing
9-10
Competition-Based Pricing
• Going-Rate Pricing:
– Firm bases its price largely on
competitors’ prices, with less attention
paid to its own costs or to demand.
• Sealed-Bid Pricing:
– Firm bases its price on how it thinks
competitors will price rather than on its
own costs or on demand.
9-11
New-Product Pricing Strategies
• When to use:
Market – Market must be highly
Penetration price sensitive so a low
price produces more
Set a low initial price market growth.
in order to – Production and
“penetrate” the distribution costs must
market quickly and fall as sales volume
deeply. increases.
– Must keep out
Can attract a large competition and
number of buyers maintain low price or
quickly and win a effects are only
temporary.
large market share. 9-13
Optional- and Captive-Product
Pricing
• Optional-Product
– Pricing optional or accessory products
sold with the main product (e.g., ice
maker with the refrigerator).
• Captive-Product
– Pricing products that must be used with
the main product (e.g., replacement
cartridges for Gillette razors).
9-14
Pricing Strategies
By-Product Pricing:
Setting a price for by-products in order to make the main
product’s price more competitive (e.g., sawdust and
Zoo Doo)
Discounts Allowances
Cash Trade-In
Quantity Promotional
Functional
Seasonal
9-16
Segmented Pricing
• Selling a product or service at two
or more prices, where the
difference in prices is not based on
differences in costs.
• Types:
1. Customer-segment
2. Product-form
3. Location pricing
4. Time pricing
9-17
Psychological Pricing
9-18
Promotional Pricing
Temporarily pricing products below list price and
sometimes even below cost to create buying
excitement and urgency.
Approaches:
Discounts
9-19
Initiating Price Changes
9-21
Public Policy and Pricing
9-22