Objective 3

Discuss how companies adjust their prices to take into account different types of customers and situations.

Companies apply a variety of price adjustment strategies to account for differences in consumer segments and situations. One is discount and allowance pricing, whereby the company establishes cash, quantity, functional, or seasonal discounts, or varying types of allowances. A second strategy is segmented pricing, where the company sells a product at two or more prices to accommodate different customers, product forms, locations, or times. Sometimes companies consider more than economics in their pricing decisions, using psychological pricing to better communicate a product's intended position. In promotional pricing, a company offers discounts or temporarily sells a product below list price as a special event, sometimes even selling below cost as a loss leader. Another approach is geographical pricing, whereby the company decides how to price to distant customers, choosing from such alternatives as FOB-origin pricing pricing, uniform-delivered pricing, zone pricing, basing-point pricing, and freight-absorption pricing. Finally, international pricing means that the company adjusts its price to meet different conditions and expectations in different world markets.

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