Price Adaptations

Prices set by a company do not always remain the same. Over time, the original price established for almost any product will have to be adjusted. The marketing executive will find it necessary to change the product’s price several times during the course of its life cycle.

They are changed or adapted depending on the needs or situations. A company needs to adapt its prices to different situations, i.e., it may charge different prices depending on geographic variation, variations in segments, purchase timing, order levels, delivery frequency, guarantees, service contracts, and some other factors.

Goals:

Price adaptations are made to pursue a number of goals;

• Change of purchase patterns
• Market segmentation
• Market expansion
• Utilization of excess capacity
• Implementation of channel strategy
• To meet the competition.

Market Segmentation

Marketers can also adapt their prices to tap segments of a market, which differ in demand elasticity.

These differences in sensitivity to price may come about because of differing values in use among various classes of buyers and/or differing competitive situations facing the seller.

Market Expansion

The market for a given product or service may be expanded by offering lower prices to customers who have lower values in use.

Utilization of Excess Capacity

Price adaptations can also be made to utilize excess production or marketing capacity.

If such capacity exists, adaptation makes a sale possible, which covers direct costs and will contribute to the firm’s total profits.

Implementation of Channel Strategy

Price adaptation is a major device by which a firm attempts to implement its marketing strategy with regard to channels of distribution. Price variations may reflect differences in marketing tasks performed by various types of resellers or differences in the competitive environments in which they operate.

Different price-adaptation strategies to be discussed here are;

Geographical pricing

The basic issue confronting the executive here is recognizing that market conditions and consumer sensitivities to price vary by geographic area. The difference in price occurs not only on wide territorial bases but also between districts and even in different parts of the same district.

Though such an exercise is very costly, the executive could segment the overall market into tiny geographic areas and set unique prices in each.

Price discounts, allowances, and Promotional pricing;

The standard price established for the product by a marketer is list price. But it is not always the actual price charged to the customer.

Here, basic prices are modified to reward customers for such acts as early payments, volume purchases, and off-season buying and called together discounts and allowances.

Marketers sometimes offer a discount or allowance to the buyers, effectively reducing the product’s list price, making it more competitive in the marketplace, stimulating short-term demand, or creating product awareness.

In order to attain any of these objectives, a marketer can choose from a variety of discount and allowance methods. Some of the most commonly used strategies are:

• Quantity discounts.
• Cash discounts.
• Trade discounts.
• Seasonal discounts.
• Promotional allowances: Loss-leader pricing, special-event pricing, cash rebates, low-interest financing, longer payment terms, warranties and service contracts, psychological discounting.
• Forward dating.

Discriminatory pricing

• Customer-Segment Pricing.
• Product-Form Pricing.
• Image Pricing.
• Location Pricing.
• Time Pricing.

Product-mix pricing

The logic of setting or charging a price on an individual product has to be modified when the product is a member of a product mix.

Six situations may be distinguished involving product-mix pricing;

• Product-­line pricing,
• Optional-feature pricing,
• Captive-product pricing,
• Two-part pricing,
• Byproduct pricing, and
• Product-bundling pricing.