Example:
Mail-order shoppers usually are charged for shipping according to the total price of their order – not the weight or volume of the package being shipped. So, customers who order light products feel cheated.
(SIC 5961 – 1995)
Answer:
There are two possible answers here. From the perspective of the shipping company, this is a Basis of Charge example. If we use the retailer as the company doing the pricing, this shipping charge is an example of an additional fee, an Optional Price Component.
Example:
HLW has an incentive-based fee scale for a laboratory it's designing. 10% of the total fee is at risk. Various benchmarks must be hit for HLW to receive all its potential revenue.
(SIC 8900-1996)
Answer:
This is an example of an Optional Price Component, a bonus fee for the seller. The 10% fee on its own, is an example of a Basis of Charge where the basis is an event occurrence.
Example:
New discount travel agents offer up to 10% rebates on the price of an airline ticket to customers who want nothing more than a ticket and a reservation.
(SIC 4700 – 1987)
Answer:
This is an Optional Component of Price using a rebate.
Example:
United Online plans to continue offering 40 hours of free service a month to users. Those who want more service have to pay. Similarly, Bluelight offers its users 12 hours a month of free Net access. After that it charges $9.95 a month.
(SIC 7375 – 2001)
Answer:
This is an Optional Component of Price raising the effective price by setting limits on the usage of the product.
Example:
Buy-two get one-free promotions and discount coupons have helped to check market share declines for Winston and Salem.
(SIC 2111 – 1992)
Answer:
This is an Optional Component of Price using a discount in kind.
Example:
The top eight e-brokers are expected to spend more than $1 billion on advertising over the next year. Many are offering new customers $75 to $100 sign-up bonuses.
(SIC 6211 – 1998)
Answer:
This is an Optional Component of Price using a one time cash payment.
Example:
Inland Steel, taking advantage of a week-old United Steelworkers strike against USX Corp., boosted prices between 2% and 3% for a broad range of flat-rolled steel products. USX currently has a 17% share of the U.S. market.
(SIC 3312 – 1986)
Answer:
This is an increase in the List Price where Inland Steel charges a premium for some products.
Example:
Often high fees on money funds reduce their yields to the point that investors in those funds are getting next to nothing on their cash. Often yields are less than 1% due to expenses. In about half of accounts, fees are waived.
(SIC 6289 – 2001)
Answer:
This is an Optional Component of Price using a fee waiver.
Example:
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)
Answer:
This is a change in the Performance Package with the addition of a Reliability benefit.
Example:
After the Lotus announcement, Borland announced a brief promotion to sell Quattro for $99.95 (2/3 the normal discount price) to anyone who mails in a cover from a Lotus 1-2-3 manual.
(SIC 7372 – 1988)
Answer:
This is an Optional Component of Price using a trade-in allowance.
Example:
By using smaller boxes, Kellogg Co. is increasing cereal prices for the second time in six months, becoming the latest food company to pass along to consumers the soaring prices for ingredients and fuel. On average, cereal-box sizes were reduced by 2.4 ounces, which amounts to a low- to midsingle-digit wholesale price increase
(SIC 2000 – 2008)
Answer:
This is a change in the Basis of Charge as the company reduced the number of ounces in a package.
Example:
Subscribers can now renew their Business Week subscription and send a year-long subscription to another person for only $59.97. That's a savings of 88% off the cover price for both subscriptions.
(SIC 2711 – 2006)
Answer:
This is an Optional Component of Price using a sample of the product.
Example:
The New Jersey Nets are giving a 10% rebate to new season-ticket buyers—in the form of a gas card.
(SIC 7841 – 2008)
Answer:
This is an Optional Component of Price using a free product from a third party.
Example:
Food Lion has a "frequent filler" card that allows gasoline customers the opportunity to get free products, like bread or milk, from the store.
(SIC 5411 – 1997)
Answer:
This is an Optional Component of Price using a free product from the company, other than the product for sale.
Example:
Amgen announced that its cancer drug Vectibix would be priced at $8000 a month but patients would receive it free after co-payments exceeded 5% of their adjusted gross income.
(SIC 2834 – 2007)
Answer:
This is an Optional Component of Price using a price cap.
Example:
Prices have stopped falling, some are going up, in PC industry. Prices soaring in peripherals market. Memory chips in short supply. Sun raised prices $500 – $750 per megabyte despite competition.
(SIC 3571 – 1988)
Answer:
This is a change in the List Price with a premium charge for products in short supply.
Example:
JM Smucker gives anyone who buys a rival product a coupon for a free Smucker product.
(SIC 2033 – 1989)
Answer:
This is an Optional Component of Price using a coupon.
Example:
Meanwhile personal digital assistant users are to be targeted by Dow Jones with an electronic newspaper, priced comparably to hard copy equivalents. When launched worldwide in 1994, Personal Journal will offer major news stories from each morning's Wall Street Journal, as well as updates throughout the day.
(SIC 2711 – 1993)
Answer:
This is a change in the Performance package with a Convenience innovation.
Example:
Bank of New York doubled its card base this year, to 1.9 million, by offering low-cost cards through the AFL-CIO. This card allows borrowers to suspend payments in the event of a strike.
(SIC 6141 – 1987)
Answer:
This is an Optional Component of Price using an extended payment term.
Example:
Most banks today no longer offer a grace period for late fees. (SIC 6021 – 1999)
Answer:
This is an Optional Component of Price raising the effective price with a reduction in the normal payment term.
Example:
Colleges with fixed-tuition rates say the programs improve retention rates. Besides providing families with some measure of tuition predictability, the cost guarantee at Western Illinois University is intended to encourage students to graduate within four years.
(SIC 8221 – 2004)
Answer:
This is an Optional Component of Price using a Call.
Example:
Cattle ranchers raising animals with as little as 12% body fat, about 1/3 less than usual. Excel, a Wichita packer, began paying ranchers $2 more per hundredweight for low-fat animals.
(SIC 200 – 1987)
Answer:
This is a change in the Performance Package with a change in Function.
Example:
Furr's submitted to Fleming a qualified competitive bid by a competing food wholesaler. Under the terms of the supply contract, if Furr's submits a qualified bid from another supplier to provide a comparable range of products at prices lower than those charged by Fleming (by more than a stated percentage) Fleming can either lower its prices to within the agreed percentage over the competing bid or allow Furr's to accept the competitor's bid .
(SIC 5141 – 1997)
Answer:
This is an Optional Component of Price using a meet or release agreement.
Example:
Thomas Group (management consulting) uses performance-based pricing. In some cases, up to 50% of its fees are based on quantifiable results, such as cycle-time reductions, inventory reduction, margin enhancements, profit improvements, or revenue increases.
(SIC 8742 – 1998)
Answer:
This is an Optional Component of Price using a Performance payment.
Example:
Sun fell on hard times. Rivals like IBM and HP started offering machines with less expensive hardware and software.
(SIC 3571 – 2004)
Answer:
This is a change in the Benefit Package where IBM and HP changed the Function benefits.
Example:
Syntex introduced a generic version of Naproxyn 2 months before its patent expired, grabbing 68% of the generic market. That forced the generic price to plunge as much as 90% below Naprosyn's, causing very low profit margins.
(SIC 2834 – 1994)
Answer:
This is a change in the Performance Package where Syntex introduced an unbranded product, a change in Reliability.
Example:
Ford guarantees the trade-in price of its new Merkur Scorpios.
(SIC 3711 – 1987)
Answer:
This is an Optional Component of Price using a Put.
Example:
Electronic textbooks may present an option for students struggling with rising textbook costs. Typically password protected online access costs about half of the price of a traditional book.
(SIC 2731 – 2006)
Answer:
This is a change in the Performance Package using a change in Convenience.
Example:
In late 1999, Oracle changed its pricing structure and began charging customers according to how many megahertz were used by computers running the databases. Customers hated the change.
(SIC 7372 – 1999)
Answer:
This is a change in the Basis of Charge to raise price.
Example:
P&G, seeking to cut its distribution costs, is considering requiring retailers to buy its products only in large quantities, effectively forcing those that need smaller amounts to pay a premium to buy through wholesalers.
(SIC 2840 – 1993)
Answer:
This is an Optional Component of Price where P&G changed the minimum purchase requirements.
Example:
Hewlett-Packard offers $125 off when you purchase an HP PC and monitor combination.
(SIC 3571 – 1997)
Answer:
This is a change in the Basis of Charge where HP sold a product package.
Example:
Wind River is pushing to get more gadget makers to use the company's software development tools and raise the performance bar in the industry. Wind River offers royalty-free deals, in which companies pay a higher upfront fee to use the development software rather than a per-unit royalty when their device ships.
(SIC 7372 – 2005)
Answer:
This is a change in the Basis of Charge where Wind River shifts from a percentage royalty to a fixed fee.
Example:
P&G is cutting discounts and other short-term incentives that wholesalers and retailers have grown to love, to reduce trade loading.
(SIC 2840 – 1992)
Answer:
This is an Optional Component of Price raising effective prices by reducing discounts.
Example:
Some manufacturers offer discounts for customers who order over the Internet or an intranet system.
(SIC 0000 – 2007)
Answer:
This is a change in List Price with a discount offer.
Example:
As home prices surge, sellers have more leverage with traditional real estate agents. Often, they can negotiate a small reduction on the typical 6% fee.
(SIC 6531 – 2005)
Answer:
This is a change in the List Price with a discount offer.
Example:
Weatherford drilling service firm has had to contend with higher materials prices, which means instituting surcharges for customers. Raw materials costs are up 20%-60%, and concurrent surcharges began in April.
(SIC 1381 – 2004)
Answer:
This is an Optional Component of Price with an extra fee on top of the variable charge.
Example:
Junking its Dreamcast machines, which it introduced a little over a year ago, leaves Sega with a costly inventory of more that two million machines; it plans to slash the $99 price to clear them out.
(SIC 3571 – 2001)
Answer:
This is a change in List Price with a discount offer.
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