Promotional Pricing

With promotional pricing, companies will temporarily price their products below list price and sometimes even below cost. Promotional pricing takes several forms. Supermarkets and department stores will price a few products as toss

How Price Signals Product Quality

Marketing

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17.1

Promotional Pricing

At this point, however. Heublein's marketers thought of a fourth strategy - and it was brilliant, Ileublein raised the price of Smirnoff by 81! The company-then introduced a new brand. Relska, to compete with Wolfschmidt. Moreover, it introduced yet another brand, Popov, priced even lower than WoHschmidt. This product line-pricing strategy positioned Smirnoff as the elite brand and Wolfschmidt as an ordinary brand. Heublein's clever strategy produced a large increase in its overall profits.

The irony is that lleuhlein's three brands are much the same in taste and manufacturing costs. Ileublein knew that a product's price signals its quality. Using price as a signal, Heublein sells roughly the same product at three different quality positions.

leaders to attract customers to the store in the hope that they will buy other items at normal mark-ups. Kellers will also use special-event pricing in certain seasons to draw in more customers. Thus linens are promotionally priced every January to attract weary Christmas shoppers back into the stores. Manufacturers will sometimes offer cash rebates to consumers who buy the product from dealers within a specified time; the manufacturer sends the rebate directly to the customer. Rebates have recently been popular with car makers and producers of durable goods and small appliances. Some manufacturers offer low-interest financing, longer warranties or free maintenance to reduce the consumer's 'price'. This practice has recently become a favourite of the car industry. Or, the seller may simply offer discounts from normal prices to increase sales and reduce inventories.

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