Chapter 11 POM
Chapter 11 POM
Chapter 11 POM
Chapter : 11
by Anam Siddiqi
Learning Objectives
b. Optional- c. Captive-
a. Product
product product
line pricing
pricing pricing
e. Product
d. By-product
bundle
pricing
pricing
2. Product Mix Pricing
Strategies
a) Product line pricing : Setting the price
steps between various products in a
product line based on cost differences
between the products, customer
evaluations of different features, and
competitors’ prices. E.g., Hotel room
rates, Car models etc.
b) Optional-product pricing : The pricing of
optional or accessory products along
with a main product. E.g., car sound
system or GPS navigation system.
2. Product Mix Pricing Strategies
a. Discount c. d.
b. Segmented
and allowance Psychological Promotional
pricing
pricing pricing pricing
g.
e. Geographic f. Dynamic
International
pricing pricing
pricing
a. Discount and allowance pricing reduces prices to reward customer
responses such as paying early, volume purchases, and off-season
buying.
3. Price- • Discounts (motivate sales)
Adjustment • Allowances (motivate payments)
Strategies b. Segmented pricing: Selling a product or service at two or more prices,
where the difference in prices is not based on differences in costs.
3. Price-Adjustment
Strategies
b. Segmented pricing:
Types:
i. Customer segment pricing e.g., Museums,
restaurants
ii. Product form segment pricing e.g., VIP,
economy class at airlines
iii. Location based pricing, e.g., International
students, cinema or airline seats
iv. Time based pricing varies by season, time,
day, hour etc. e.g., hotels give seasonal or
weekend discounts
Segmented Pricing
• To be effective:
• Market must be possible to segment it
• Segments must show different degrees
of demand
• Costs of segmenting and reaching the
market cannot exceed the extra revenue
obtained from the price difference.
• Must be legal
3. Price-Adjustment Strategies
3. Price- factors
• Economic conditions
• Competitive conditions
• Excess capacity
4.Price Changes • Decreased demand
• Strong price competition
Initiating
Pricing
Changes Price increase from:
• Cost inflation
• Increased demand
• Lack of supply
4. Price Changes
Buyer Reactions to Price Changes
• Product is “exclusive”
Price increases • Company greed
Responding to
Competitor price
changes