Marketing Management, Millenium Edition - epiheirimatikotita.gr

228 CHAPTER 12 DESIGNING PRICING STRATEGIES AND PROGRAMSTable 4.5Promotional Pricing TechniquesTechnique Description ExampleLoss-leader pricing Stores drop the price on wellknownKmart cuts the price of selectedbrands to stimulate toys to attract shoppers beforeadditional store traffic. Christmas.Special-event pricingCash rebatesLow-interestfinancingLonger paymenttermsWarranties andservice contractsPsychologicaldiscountingSellers establish special pricesin certain seasons to draw inmore customers.Manufacturers offer cashrebates to encourage purchaseof their products within aspecified period; this helpsclear inventories withoutcutting the stated price.Instead of cutting its price, thecompany can offer customerslow-interest financing.Sellers stretch loans overlonger periods and thus lowerthe monthly payments thatcustomers pay.Companies can promote salesby adding a free or low-costwarranty or service contract.Used legitimately, this involvesoffering the item at substantialsavings from the normal price.Staples offers special prices onstationery items during a backto-schoolsale.Mazda advertises cash rebates onthe purchase of selectedprevious-year models to clearthese vehicles out of dealerinventory.Ford offers low- or no-interestfinancing to encourage thepurchase of selected vehicles.Auto companies and mortgagebanks use this approach becauseconsumers are more concernedwith affordable payments thanwith the interest rate.Real estate brokers offer specialwarranties on selected homes toexpedite sales.A jewelry store lowers the priceof a diamond ring and advertises“Was $359, now $299.”Discriminatory PricingCompanies often adjust their basic price to accommodate differences in customers,products, locations, and so on. Discriminatory pricing occurs when a company sells aproduct or service at two or more prices that do not reflect a proportional differencein costs. Discriminatory pricing takes several forms:➤➤➤Customer-segment pricing: Different customer groups pay different prices for the samegood or service. For example, museums often charge a lower admission fee tostudents and senior citizens.Product-form pricing: Different versions of the product are priced differently but notproportionately to their respective costs. Evian, for instance, prices a 48-ouncebottle of its mineral water at $2, while its 1.7 ounce moisturizer spray sells for $6.Image pricing: Some companies price the same product at two different levels basedon image differences. For instance, a perfume manufacturer can put its perfume inone bottle with a certain name and image priced at $10 an ounce; the same perfumein another bottle with a different name and image could be priced at $30 an ounce.