PRICING

Presented By
Santosh kumar sah preeti Dhirendra Priya Saroj

Price

Price (P) is the money or other considerations (including other goods and services) exchanged for the ownership or use of a good or service.

Objectives of Pricing

Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership

Factors to Consider in Setting Price

Internal Factors

Marketing objectives Marketing mix strategies Costs Organizational considerations

Factors to Consider in Setting Price (contd.)

External Factors

Nature of market and demand Competition Other environmental elements

Setting Pricing Policy

1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors costs, prices, and offers

5. Selecting a pricing method 6. Selecting final price

Types of Costs
Fixed Costs (Overhead) Variable Costs
Costs that do vary directly with the level of production. Raw materials

Costs that dont vary with sales or production levels. Executive Salaries Rent

Total Costs
Sum of the Fixed and Variable Costs for a Given Level of Production

Price-Reaction Program for Meeting a Competitors Price Cut

Has competitor cut his price? No
Hold our price at present level; continue to watch competitors price

No No Yes Is the price Is it likely to be How much has likely to permanent Yes his price been significantly Yes aprice cut? cut? hurt our sales? By less than 2% Include a cents-off coupon for the next purchase By 2-4% Drop price by half of the competitors price cut

By more than 4% Drop price to competitors price

Marketing Strategy Over the Product Life Cycle

INTRODUCTION
Marketing strategy emphasis
Market development

GROWTH
Increase market share

MATURITY
Defend market share

DECLINE
Maintain efficiency in exploiting product

Pricing strategy

High price/unique
product / cover production costs Low price/gain market share

Lower price
over time

Price at or below
competition

Set price to
remain profitable or reduce to liquidate

Pricing Policies for New product

Market-skimming pricing Market-penetration pricing

Market-skimming pricing
Skimming is a pricing objective in which price is initially set high on merchandise to skim the cream of demand before selling at more competitive prices.

Market-penetration pricing
Penetration is a pricing objective in which price is set at a low level in order to penetrate the market and establish a loyal customer base.

Pricing Methods

Markup Pricing Target Return Pricing Perceived Value Pricing Value Pricing Going-Rate Pricing Sealed-Bid Pricing

Markup Pricing
The most elementary pricing method is to add a standard markup to the products cost. Construction companies do this when they submit job bids by estimating the total project cost and adding a standard markup for profit.

Target Return Pricing

In target-return pricing, the firm determines the price that would yield its target rate of return on investment (ROI). Target pricing is used by many firms, including General Motors, which prices its automobiles to achieve a 1520 percent ROI.

Perceived Value Pricing

An increasing number of companies base price on customers perceived value. They see the buyers perceptions of value, not the sellers cost, as the key to pricing. Then they use the other marketing-mix elements, such as advertising, to build up perceived value in buyers minds.

Value Pricing
Value pricing is a method in which the company charges a fairly low price for a high quality offering. Value pricing says that the price should represent a high-value offer to consumers.

Value Pricing

Price set in accordance with customer perceptions about the value of the product/service Examples include status products/exclusive products

Companies may be able to set prices according to perceived value.

Going-Rate Pricing

In case of price leader, rivals have difficulty in competing on price too high and they lose market share, too low and the price leader would match price and force smaller rival out of market May follow pricing leads of rivals especially where those rivals have a clear dominance of market share
Where competition is limited, going rate pricing may be applicable banks, petrol, supermarkets, electrical goods find very similar prices in all outlets

Sealed-Bid Pricing
Competitive-oriented pricing is common when firms submit sealed bids for jobs. In bidding, each firm bases its price on expectations of how competitors will price rather than on a rigid relationship to the firms own costs or demand.

Pricing strategies

Psychological pricing Discriminatory Pricing Discount and allowance pricing Segmented pricing Promotional pricing Geographical pricing Demand/Market based pricing

Psychological pricing
Many consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.

Promotional Pricing

Loss leader pricing Special event pricing Cash rebate Low interest financing Longer payment terms Warranties and service contracts Psychological discounting

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Psychological pricing

It is used to lessen the impact of the actual pricing in the consumers mind It is used as a surrogate to indicate the product quality or esteem

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Discriminatory Pricing

Customer segment Product form Image pricing Location pricing Time pricing

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Geographical Pricing

Different pricing at different locations Could be in terms of barter, countertrade and foreign currency

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Discounts and Allowances

Early payment Off season Bulk purchase Retail discount Cash discount Trade in allowance

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Demand/Market based pricing

In this method, the basic assumption is that sales and profits are independent of costs, but are dependent on the demand.

Specific Pricing Strategies

1. 2.

3.
4. 5.

6.

Customary Pricing Variable Pricing Flexible Pricing One-Price Policy Price Lining Odd Pricing

7. Multiple-Unit Pricing 8. Bundle Pricing 9. Leader Pricing 10. Bait-and-Switch Pricing 11. Private Label Brand Pricing

Customary pricing

Customary pricing is a policy in which the retailer sets prices for goods and services and seeks to maintain those prices over an extended period of time

Variable pricing

Variable pricing is a policy that recognizes that differences in demand and cost necessitate that the retailer change prices in a fairly predictable manner.

Flexible pricing

Flexible pricing is a policy that encourages offering the same products and quantities to different customers at different prices.

One-price policy

One-price policy is a policy that establishes that the retailer will charge all customers the same price for an item.

Price lining

Price lining is make merchandise comparisons and invola pricing policy that is established to help customers ves establishing a specified number of price points for each merchandise classification.

Odd pricing

Odd pricing is the practice of setting retail prices that end in the digits 5, 8, 9 such as Rs 29.95, Rs49.98, or Rs9.99.

Multiple-unit pricing

Multiple-unit pricing occurs when the price of each unit in a multiple-unit package is less than the price of each unit if it were sold individually

Bundling pricing

Bundling pricing occurs when distinct multiple items, generally from different merchandise lines, are offered at a special price

Leader pricing

Leader pricing is when a high-demand item is priced low and is heavily advertised in order to attract customers into the store.

Bait-and-switch pricing

Bait-and-switch pricing is illegal practise of batting customers with unrealistically low prices to bring them into the store, and then trying to sell them higher-priced goods on the pretext that the advertised bargain-priced goods are sold out.

Private label brand pricing

It is the price of the private label products or services are typically price pf those manufactured or provided by one company for offer under another companys brand. This is available in the private label goods and services available in a wide range of industries from food to cosmetics to web hosting.