We will address the following questions

■ How should a company price a new good or service?

■ How should the price be adapted to meet varying circumstances and opportunities?

■ When should the company initiate a price change, and how should it respond to competitive price changes?

All for-profit organizations and many nonprofit organizations set prices on their goods or services. Whether the price is called rent (for an apartment), tuition (for education), fare (for travel), or interest (for borrowed money), the concept is the same. Throughout most of history, prices were set by negotiation between buyers and sellers. Setting one price for all buyers arose with the development of large-scale retailing at the end of the nineteenth century, when Woolworth's and other stores followed a "strictly one-price policy" because they carried so many items and had so many employees.

Now, 100 years later, technology is taking us back to an era of negotiated pricing. The Internet, corporate networks, and wireless setups are linking people, machines, and companies around the globe, connecting sellers and buyers as never before. Web sites like Compare.Net and PriceScan.com allow buyers to compare products and prices quickly and easily. On-line auction sites like eBay.com and Onsale.com make it easy for buyers and sellers to negotiate prices on thousands of items. At the same time, new technologies are allowing sellers to collect detailed data about customers' buying habits, preferences—even spending limits—so they can tailor their products and prices.1

In the entire marketing mix, price is the one element that produces revenue; the others produce costs. Price is also one of the most flexible elements: It can be changed quickly, unlike product features and channel commitments. Although price competition is a major problem facing companies, many do not handle pricing well. The most common mistakes are these: Pricing is too cost-oriented; price is not revised often enough to capitalize on market changes; price is set independent of the rest of the marketing mix rather than as an intrinsic element of market-positioning strategy; and price is not varied enough for different product items, market segments, and purchase occasions.

Figure 4-8 Nine Price-Quality Strategies f Hlgfc

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