Chapter 15 – Strategic Pricing Methods Marketing 6th
Chapter 15
Strategic Pricing Methods
Tools for Instructors
Brief Chapter Outline
Learning Objectives
Extended Chapter Outline with Teaching Tips
Answers to End of Chapter Learning Aids
Chapter Case Study
Additional Teaching Tips
Connect Activities
Brief Chapter Outline
Considerations for Setting Price Strategies
Pricing Strategies
Pricing Tactics
Legal and Ethical Aspects of Pricing
End of Chapter Learning Aids
Chapter Case Study: Pizza Players, Pizza Prices
Learning Objectives
LO15-1 Identify three methods that firms use to set their prices.
The various methods of setting prices have their advantages and disadvantages. The three primary
methods are cost based, competitor based, and value based. The cost-based techniques are quick and
easy but fail to reflect the competitive environment or consumer demand. Although it is always advisable
LO15-2 Describe the difference between an everyday low pricing (EDLP) strategy and a high/low
strategy.
An everyday low pricing strategy is maintained when a product’s price stays relatively constant at a level
that is slightly lower than the regular price from competitors using a high/low strategy, and is less
LO15-3 Explain the difference between a price skimming and a market penetration pricing strategy.
When firms use a price skimming strategy, the product or service must be perceived as breaking new
ground, or customers will not pay more than what they pay for other products. Firms use price skimming
to signal high quality, limit demand, recoup their investment quickly, and/or test people’s price sensitivity.
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education. 1
Chapter 15 – Strategic Pricing Methods Marketing 6th
LO15-4 Identify tactics used to reduce prices to consumers.
Marketers use a variety of tactics to provide lower prices to consumers. The tactics include markdowns,
LO15-5 Identify tactics used to reduce prices to businesses.
Seasonal discounts give retailers an incentive to buy prior to the normal selling season, cash discounts
prompt them to pay their invoices early, and allowances attempt to get retailers to advertise the
LO15-6 List the pricing practices that are illegal or unethical
There are almost as many ways to get into trouble by setting or changing a price as there are pricing
strategies and tactics. Some common legal issues pertain to advertising deceptive prices. Specifically, if a
Extended Chapter Outline with Teaching Tips
I. Considerations for Setting Price Strategies
A. Cost-Based Methods
B. Competition-Based Methods
C. Value-Based Pricing Methods
1. Improvement Value Method
2. Cost of Ownership Method
3. Implementing Value-Based Pricing Methods
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1What are the three different strategies for setting pricing?
2How can you use value-based strategies for setting prices?
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education. 2
Chapter 15 – Strategic Pricing Methods Marketing 6th
II. Pricing Strategies
A. Everyday Low Pricing (EDLP)
B. High/Low Pricing
C. New Product Pricing Strategies
1. Penetration Pricing
2. Price Skimming
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1Explain the difference between EDLP and high/low pricing.
Answer: With an everyday low pricing (EDLP) strategy, companies stress the continuity of their
retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale
prices their competitors may offer. By reducing consumers’ search costs, EDLP adds value;
2What pricing strategies should be considered when introducing a new product?
III. Pricing Tactics
A. Pricing Tactics Aimed at Consumers
1. Markdowns
2. Quantity Discounts for Consumers
3. Seasonal Discounts
4. Coupons
5. Rebates
6. Leasing
7. Price Bundling
8. Leader Pricing
9. Price Lining
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education. 3
Chapter 15 – Strategic Pricing Methods Marketing 6th
B. Business Pricing Tactics and Discounts
1. Seasonal Discounts
2. Cash Discounts
3. Allowances
4. Quantity Discounts
5. Uniform Delivered versus Zone Pricing
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1What are some consumer-oriented pricing tactics?
2What are some B2B pricing tactics?
IV. Legal and Ethical Aspects of Pricing
A. Deceptive or Illegal Price Advertising
1. Deceptive Reference Prices
2. Loss-Leader Pricing
3. Bait and Switch
B. Predatory Pricing
C. Price Discrimination
D. Price Fixing
1. Gray Market Pricing
Progress Check: Several questions are offered for students to check their understanding of core
concepts.
1What common pricing practices are considered to be illegal or unethical?
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education. 4