Setting Price

Step 3: Set Standard Price Adjustments

With the first round of pricing decisions now complete, the marketer’s next step is to consider whether there are benefits to making adjustments to the list or published price.  For our purposes we will consider two levels of price adjustments – standard and promotional.  The first level adjustments are those we label as “standard” since these are consistently part of the marketer’s pricing program and not adjustments that appear only occasionally as part of special promotions (see Step 4: Determine Promotional Pricing). 

In most cases standard adjustments are made to reduce the list price in an effort to either stimulate interest in the product or to indirectly pay channel partners for the services they offer when handling the product.  In some circumstances the adjustment goes the other way and leads to price increases in order cover additional costs incurred when selling to different markets. 

It should be noted that many companies do not make adjustments to their list price, particularly those selling directly to final customers.  There are two key reasons for this.  First, the product is in high demand and therefore the marketer sees little reason to lower the price.  Second, the marketer believes the product holds sufficient value for customers at its current list price and the marketer feels reducing the price may actually lead buyers to question the quality of the product (e.g., “How can they offer all those features for such a low price? Something must be wrong with it.”). In such cases holding fast to the list price allows the marketer to maintain some control over the product’s perceived image.

For firms that do make standard price adjustments, options include:

• Quantity Discounts
• Trade Allowances
• Special Segment Pricing
• Geographic Pricing