Introduction

In this chapter, we will look at the complex dynamics of pricing. A company does not set a single price, but rather a pricing structure that covers different items in its line. This pricing structure changes over time as products move through their life cycles. The company adjusts product prices to reflect changes in costs and demand, and to account for variations in buyers and situations. As the competitive environment changes, the company considers when to initiate price changes and when to respond to them. And as the cellular phone example demonstrates forcefully, pricing decisions are subject to an incredibly complex array of environmental and competitive forces.

This chapter examines the dynamic pricing strategics available to management. In turn, we look at new-product pricing strategies for products in the introductory stage of the product life cycle, product-mix pricing strategies for related products in the product mix, price-adjustment strategies that account for customer differences and changing situations, and strategics for initiating and responding to price changes.2

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