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14-3
1. Geographical Pricing Barter: the direct exchange of goods with no money and no
third party involved Compensation deal: the seller receives some percentage of
the payment in cash and the rest in products Buyback arrangement: the seller sell a plant equipment or
technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment
Offset: the seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period.
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2. Price Discounts and Allowances
Quantity discount:Quantity discount: The more you buy, the cheaper it becomes-- cumulative and non-cumulative.Trade discountsTrade discounts:: Reductions from list for functions performed-- storage, promotion.Cash discountCash discount:: A deduction granted to buyers for paying their bills within a specified period of time, (after first deducting trade and quantity discounts from the base price)
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Functional discount: discount offered by a manufacturer to trade-channel members if they will perform certain functions.Seasonal discount: a price reduction to those who buy out of season.Allowance: an extra payment designed to gain reseller participation in special programs.
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3. Promotional Pricing• Loss-leader pricing: supermarkets and department stores
often drop the price on well known brands to stimulate additional store traffic
• Special-event pricing: sellers well establish special pricing in certain seasons to draw in more customers
• Cash rebates: companies offer cash rebates to encourage purchase of the manufacturers products within a specified time period
• Low-interest financing: the company can offer customers low-interest financing
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• Longer payment terms: sellers especially mortgage banks and auto companies stretch loans over longer periods and thus lower the monthly payment
• Warranties and service contracts: companies can promote sales by adding a free or low cost warranty or service contract
• Psychological discounting: this strategy involves setting an artificially high price and then offering the product at substantial savings
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4. Discriminatory Pricing
• Price discrimination works when:– Market segments show different intensities of demand– Consumers in lower-price segments can not resell to higher-
price segments– Competitors can not undersell the firm in higher-price
segments– Cost of segmenting and policing the market does not
exceed extra revenue
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Discriminatory Pricing Tactics:– Customer segment pricing– Product-form pricing– Image pricing– Channel pricing– Location pricing– Time pricing
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5. Discriminatory Pricing There are six situations involving product mix pricing:1) Product line pricing: Companies normally develop product lines rather than
single products and introduce price steps. 2) Optional feature pricing:Many companies offer optional products, features and
service along with their main product.3) Captive product pricing:Some products require the use of ancillary or captive
products.
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4) Two part pricing product:Service firms often engage in two-part pricing consisting of
affixed fee plus variable usage fee.
5) By-product pricing:The production of certain goods-meat petroleum products
often results in by-products.
6) Product bundling:Sellers often bundle products and features.
Thank You.Thank You.