Page 382 - Foundations of Marketing

Pricing Concepts and Management | Chapter 12 349

Special-Event Pricing
To increase sales volume, many organizations coordinate price with advertising or sales
promotions for seasonal or special situations. Special-event pricing involves advertised sales
or price cutting linked to a holiday, season, or event. If the pricing objective is survival, then
special sales events may be designed to generate necessary operating capital.

Comparison Discounting

Comparison discounting sets the price of a product at a specific level and simultaneously
compares it with a higher price. The higher price may be the product’s previous price, the
price of a competing brand, the product’s price at another retail outlet, or a manufacturer’s
suggested retail price. Customers may find comparison discounting informative, and it can
have a significant impact on them.
However, because this pricing strategy on occasion has led to deceptive pricing prac-
tices, the Federal Trade Commission has established guidelines for comparison discounting.
If the higher price against which the comparison is made is the price formerly charged for
the product, sellers must have made the previous price available to customers for a reason-
able period of time. If sellers present the higher price as the one charged by other retailers
in the same trade area, they must be able to demonstrate that this claim is true. When they
special-event pricing
present the higher price as the manufacturer’s suggested retail price, then the higher price
Advertised sales or price cutting
must be close to the price at which a reasonable proportion of the product was sold. Some linked to a holiday, season,
manufacturers’ suggested retail prices are so high that very few products actually are sold or event
at those prices. In such cases, it would be deceptive to use comparison discounting. The
comparison discounting
Internet has allowed consumers to be more wary of comparison discounting and less suscep- Setting a price at a specific
tible to deception, as they can easily compare the listed price for a product with comparable level and comparing it with a
products online. higher price

Marketing Debate

Should Cash and Credit Prices Differ?

ISSUE: Should marketers be allowed to charge one have credit transactions processed, usually about 2 to
price for credit purchases and another for cash 3 percent of the amount charged. Their prices reflect
purchases? these fees, passing them along to customers who use
credit. Because cash transactions aren’t subject to these
Many gas stations (and some other marketers) set one processing fees, marketers can set lower prices for cash-
price for credit purchases and a lower price for cash paying customers, as many (but not all) gas stations do.
purchases. No, credit customers aren’t being charged Yet customers who are attracted by the low cash-
more—in fact, adding a surcharge to a credit-card discount price may not even notice that there are two
purchase is illegal in 10 states, and the credit-card prices until they hand over a credit card. Also, some say
companies don’t allow extra fees, either. However, that cash discounts should be offered only on sizable or
marketers can offer a discount for paying with cash, as luxury purchases, not on smaller, everyday purchases
long as the two prices are clearly disclosed. But should of necessities. Finally, some critics argue that marketers
cash and credit prices differ? should absorb the credit-card fees as a cost of doing
Marketers that accept Visa, MasterCard, American business and set one price regardless of how the buyer
d
Express, and other credit cards have to pay fees to pays. What do you think?

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