Self Test #23A: Targeting Segments for the New Price

Test #1:
How does a company change the level of price?

Test #2:
Why segment customers in order to do pricing?

Test #3:
How does this segmentation for pricing differ from the segmentation for new products and services?

Test #4:
What segments do companies tend to use when changing the level of pricing in a falling price environment?

Test #5:
What kind of customer segments fall under the Product Purchased segments group?

Test #6:
What customer segments would be considered Margin Building segments?

Test #7:
What customer segments might be included in the Competitive Supplier segments?

Test #8:
Identify the major segments (i.e., Product Purchased, Margin Building or Competitive Supplier) and sub-segment for each of these following examples:

Saks 25% off "Friends and Family" sale excludes Gucci, Cartier, Chanel, Loro Piana, Oscar de la Renta, Zegna, and Christian Louboutin.
(SIC 5600 – 2009)

Greyhound has had to respond to deep fare cuts by some airlines. Continental recently slashed its Texas fares to as low as $9 between Dallas and Houston. So earlier this month, Greyhound announced new Texas ticket prices that included a $5 fare between the 2 cities.
(SIC 4111 – 1990)

In 1988, AT&T had Multi-Location Calling Plan that let companies earn discounts based on the traffic volume from all their locations, not just the main office.
(SIC 4813 – 1988)

Although cigarette makers are raising prices, they are also bombarding smokers with promotions to soften the blow. Analysts estimate that smokers are actually paying only around 11% more than they were in September, although prices are up more than 27%.
(SIC 2111 – 1998)

Mercedes-Benz is offering a discount deal to lease a sedan for $630/mo. for 36 mos., a $120-a-month savings from the old monthly payment. Cadillac Seville also comes with a discount lease.
(SIC 3711 – 1992)

While many retailers cut free shipping offers or made them subject to restrictions, Gap Inc offered free shipping to customers who registered their email address with the retailer before Thanksgiving. Vermont Teddy Bear offered a similar program.
(SIC 5900 – 2006)

The three main US manufacturers have relied for years on the advice of physicians, along with free packs of formula given to new mothers at hospitals.
(SIC 2023 – 1996)

Most cruise costs are fixed whether a ship's berths are filled or not, so it is better to sell cheap than not at all. Last minute cruise bargains are widely available. Some are finding that it is cheaper to go on a cruise than to stay home.
(SIC 4481 – 2000)

To earn more Flex Funds from Philip Morris, retailers offer smokers of RJR's Winstons a free Marlboro cigarette and suggest they consider switching.
(SIC 2111 – 1998)

Ross sells off-price family apparel at prices averaging 30% to 40% less than department stores.
(SIC 5600 – 1990)

Three carriers competed for business users by offering similar pricing schemes. As strategies converged, margins dwindled. When a new carrier entered the market in 1994 offering a different pricing plan tailored to low-volume users, the leaders copied its offer, squashing its attempt to be different.
(SIC 4812 – 1994)

As the housing market slows, home builders are rolling out incentives to encourage sales. Hovnanian Enterprises launched a "Deal of the Century" promotion which offers discounts of up to $149,000. The best discounts were available on homes that were already started.
(SIC 1521 – 2007)

Government and private health groups have negotiated discounts of 25-60%+ off usual wholesale prices.
(SIC 2834 – 1991)

Pratt offered a 96% discount on its engine for new Boeing 777 aircraft. GE bettered Pratt's offer with concessions worth an extra $30 million.
(SIC 3724 – 1993)

IBM says it is cutting prices by as much as 35% on some older models, as it introduces new computers.
(SIC 3571 – 1987)

Customers buy refilled cartridges for a fraction of what they'd pay for a new one. Those who trade in their old cartridges get a bigger discount.
(SIC 2893 – 2004)

Test #9:
In a rising price environment, the company would like to know that its competitors are unlikely to try to counter the company’s price increase with a lower price. What factors must the company consider in making that evaluation?

Test #10:
What segments might the company see in a rising price environment?

Test #11:
What customer segments might be captive to the company?

Test #12:
What segments of customers exist where competitors cannot counter the company’s change in value?

Test #13:
What segments of customers exist where competitors are unlikely to counter the company?

Test #14:
Identify the major segments and supporting segments used in the following price increases:

When milk prices fell, the Ofosky Brothers Farm put the milk back in bottles and sold nostalgia along with the milk. Milk was left unhomogenized, so there's a thick layer of cream on top. Price is twice that of regular milk. Loyal following.
(SIC 2020 – 1994)

Huggies recently followed P&G's price-raising and raised prices on superabsorbent diapers 7%. Both companies will have higher profits.
(SIC 2679 – 1987)

DEC to sell its PC model for about $4,300, the IBM PC-AT (similar speed) available for about $3,000. But DEC's compatible with its VAX machines.
(SIC 3571 – 1986)

As cellular service providers roll out Internet-accessible services and devices, consumers are finding that their access may be limited. Both Sprint and Cingular have begun to charge according to the amount of data transfer, rather than a fixed fee.
(SIC 4812 – 2006)

Bounce protection offered by banks, which are charging huge fees for covering overdrafts rather than bouncing transactions, makes up nearly 30% of all bank service fees.
(SIC 6021 – 2005)

Organic products typically cost about 20% to 30% more than other food.
(SIC 191 – 2001)

In order to compete in the refrigerated trucking industry, Marten Transport is working to improve customer behavior. The company charges customers for wait time and rewards those who have worked to improve efficiency. Companies with notorious inefficiencies can see rate increases of 5 to 20%.
(SIC 4213 – 2003)

Prices for most vitamin products have been rising at about 2 to 3% a year. But wholesale prices of natural vitamin E have been rising 10% to 12% a year.
(SIC 2834 – 1997)

Citrus Hill was calcium fortified and by 1989 had the endorsement of the American Medical Women's Association. They charge premium prices of about 11% for the standard product.
(SIC 2037 – 1989)

Due to increased demand for premium alcohol, distillers are increasing the price of their premium brands to elevate their images.
(SIC 2085 – 1989)

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