Page 380 - Foundations of Marketing

Pricing Concepts and Management | Chapter 12 347

price usually is considerably less than the sum of the prices
of the individual products. Being able to buy the bundled
combination in a single transaction may be of value to the
customer, increasing convenience and a sense of value.
Bundle pricing is used commonly for banking and travel
services, computers, and automobiles with option pack-
ages. Bundle pricing can help to increase customer satis-
faction. It can also help firms to sell slow-moving inventory
and increase revenues by bundling it with products with a
higher turnover.

Everyday Low Prices (EDLPs)

To reduce or eliminate the use of frequent short-term price
reductions, some organizations use an approach referred to
as everyday low prices (EDLPs) . When EDLPs are used,
a marketer sets a low price for its products on a consistent
basis, rather than setting higher prices and frequently dis-
counting them. EDLPs, though not deeply discounted, are
set low enough to make customers feel confident that they
are receiving a good deal. EDLPs are employed by retail-
ers, such as Walmart, and by manufacturers, such as Procter
& Gamble. A company that uses EDLPs benefits from
reduced promotional costs, reduced losses from frequent
markdowns, and more stable sales. A major problem with
this approach is that customers can have mixed responses
to it. In some instances, customers believe that EDLPs are
a marketing gimmick, and not truly the good deal that they Bob Daemmrich/Alamy Limited
proclaim.

Customary Pricing
Everyday Low Prices
In customary pricing , certain goods are priced on the basis Walmart is a major user of the Everyday Low Price strategy.
of tradition. Examples of customary, or traditional, prices
would be those set for candy bars and chewing gum. This is
a less common pricing strategy now than it was in the past.

Product-Line Pricing

Rather than considering products on an item-by-item basis when determining pricing strate-
gies, some marketers employ product-line pricing. Product-line pricing means establishing
and adjusting the prices of multiple products within a product line. Product-line pricing can
provide marketers with flexibility in setting prices. For example, marketers can set prices so
that one product is profitable, whereas another is less profitable but increases market share
by virtue of having a low price. When marketers employ product-line pricing, they have
several strategies from which to choose. These include captive pricing, premium pricing,
and price lining. everyday low prices (EDLPs)
Setting a low price for products
Captive Pricing on a consistent basis
customary pricing Pricing on
When marketers use captive pricing , the basic product in a product line is priced low, but the the basis of tradition
price on the items required to operate or enhance it are higher. A common example of captive
captive pricing Pricing the
pricing is printer ink. The printer is generally priced quite low, but the printer ink replacement basic product in a product line
cartridges are usually very expensive. This pricing strategy is effective because consumers low, but pricing related items at
must purchase far more replacement cartridges than printers over their lifetimes. a higher level

Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.