Unit 6 Prices and Commodities

Read the following information about different pricing strategies that companies use and do the task below.

PRICING STRATEGIES

Premium Pricing

A high price is charged where there is uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charged for luxuries.

Penetration Pricing

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.

Economy Pricing

This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming

Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches were implemented.

Premium pricing, penetration pricing, economy pricing and price skimming are the four main pricing policies/strategies. However, there are other important approaches to pricing.

Psychological Pricing

This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example, 99 cents not one dollar.

Product Line Pricing

Where there is a range of products or services the pricing reflects the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax would add up to $4, and the whole package would cost $6.

Optional Product Pricing

Companies will attempt to increase the amount customers spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing

Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing

Here sellers combine several products in the same package. This also serves to move old stock.

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Freemium pricing

Freemium is a business model that works by offering a product or service free of charge (typically digital offerings such as software, content, games, web services or other) while charging a premium for advanced features, functionality, or related products and services. The word "freemium" combines the two aspects of the business model: "free" and "premium". It has become a highly popular model, with notable success.

Dynamic pricing

A flexible pricing mechanism made possible by advances in information technology, and employed mostly by Internet based companies. By responding to market fluctuations or large amounts of data gathered from customers - ranging from where they live to what they buy to how much they have spent on past purchases - dynamic pricing allows online companies to adjust the prices of identical goods to correspond to customers’ willingness to pay. The airline industry is often cited as a dynamic pricing success story. In fact, it employs the technique so artfully that most of the passengers on any given airplane have paid different ticket prices for the same flight.

Promotional Pricing

Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Target pricing

Pricing method whereby the selling price of a product is calculated to produce a particular rate of return on investment for a specific volume of production. The target pricing method is used most often by public utilities, like electric and gas companies, and companies whose capital investment is high, like automobile manufacturers.

Predatory pricing

Aggressive pricing intended to drive out competitors from a market. It is illegal in some places.

Value Pricing

This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

Now look at the situations below. In pairs decide which pricing strategies above could be used in these situations.

1.new luxury product for an exclusive market

2.too many competitors in a weak market

3.immediate financial problems for the company

4.temporary slowdown in the national economy

5.monopoly or near monopoly situation

6.market leader negotiating a major government contract

7.big increase in costs of materials, components, etc.

8.expanding market

9.improving company reputation for quality, reliability, service and value

10.the company has recently been privatised.

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Unit 7 Corporate Entertaining

SMALL TALK

Small talk is a vital part of doing business. It shows an ability to get on with people. Small talk helps business partners get to know each other. Topics for small talk can come from the immediate environment, the news, or from conversation. The art of small talk is to make conversation about that topic.

Use the prompts below to develop small talk. Student В has the same list of prompts. Together, you should develop a conversation of no more than two minutes for the prompts below. See the example.

1 You know that yesterday a private helicopter crashed nearby.

A:You heard about the helicopter crash yesterday?

B:Yes, it was very bad. Why did it crash?

A:I think it was a mechanical problem ... the radio said it was ...

B:but the weather was very bad too ...

A:Yes, it was raining ...

B:Have you ever been in a helicopter?

2 A local newspaper has reported a rise in tourists visiting the region. 3 A top banker has suddenly left his post to join the competition.

4 A local factory has announced 400 new jobs.

5 Ten people have died in a food poisoning scandal.

6 The heating and air conditioning system has broken down.

7 There are painters and decorators around painting and decorating the place. 8 It has not rained for over three months.

9 There's a wonderful ceramic bowl on the table full of different types of fruit. 10 A hotel had to be evacuated in the night because of a fault in the fire alarm.

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Учебное издание

Аверьянова Светлана Вячеславовна Семенова Елена Юрьевна

JUST BUSINESS

Part II

Учебное пособие для слушателей ВАВТ

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