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    The Price: Objective: The Learners Shall Be Able To Identify and Describe The Factors To Consider

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    Arvin John Lobo
    The document discusses factors to consider when setting prices, including pricing objectives, procedures, strategies, and approaches. It provides definitions of key pricing concepts and outlines several pricing methods such as cost-plus, target rate of return, perceived value, promotional pricing, and discriminatory pricing. Specific strategies covered include geographical pricing using points like zone-delivered pricing, as well as discounts, allowances, and adapting prices for different customer segments, products, locations, and time periods. The overall aim is to help students understand how to determine prices for new products and choose appropriate general pricing approaches.

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    The Price: Objective: The Learners Shall Be Able To Identify and Describe The Factors To Consider

    Uploaded by

    Arvin John Lobo
    32 views19 pages
    The document discusses factors to consider when setting prices, including pricing objectives, procedures, strategies, and approaches. It provides definitions of key pricing concepts and outlines several pricing methods such as cost-plus, target rate of return, perceived value, promotional pricing, and discriminatory pricing. Specific strategies covered include geographical pricing using points like zone-delivered pricing, as well as discounts, allowances, and adapting prices for different customer segments, products, locations, and time periods. The overall aim is to help students understand how to determine prices for new products and choose appropriate general pricing approaches.

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    The document discusses factors to consider when setting prices, including pricing objectives, procedures, strategies, and approaches. It provides definitions of key pricing concepts and outlines several pricing methods such as cost-plus, target rate of return, perceived value, promotional pricing, and discriminatory pricing. Specific strategies covered include geographical pricing using points like zone-delivered pricing, as well as discounts, allowances, and adapting prices for different customer segments, products, locations, and time periods. The overall aim is to help students understand how to determine prices for new products and choose appropriate general pricing approaches.

    Copyright:

    © All Rights Reserved
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    Download as pptx, pdf, or txt
    32 views19 pages

    The Price: Objective: The Learners Shall Be Able To Identify and Describe The Factors To Consider

    Uploaded by

    Arvin John Lobo
    The document discusses factors to consider when setting prices, including pricing objectives, procedures, strategies, and approaches. It provides definitions of key pricing concepts and outlines several pricing methods such as cost-plus, target rate of return, perceived value, promotional pricing, and discriminatory pricing. Specific strategies covered include geographical pricing using points like zone-delivered pricing, as well as discounts, allowances, and adapting prices for different customer segments, products, locations, and time periods. The overall aim is to help students understand how to determine prices for new products and choose appropriate general pricing approaches.

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    THE PRICE

    Objective: The learners shall be able to identify and describe the factors to consider
    when setting prices and new product pricing and its general pricing approaches.
    At the end of the chapter, the student is expected to understand the following:
    • Definition of price and pricing
    • Pricing objectives
    • The pricing procedure
    • Pricing strategy
    • Pricing approaches
    • Promotional pricing
    • Discriminatory pricing
    • Kinds of competitive situations
    THE PRICE

    The second variable in the marketing mix is the price. If it is set


    correctly, there is a chance that firm’s sales and profits goals will
    be achieved.
    • Price is the money, good, or service exchanged for the ownership
    or use of a good or service.
    • Pricing may be defined as those activities involved in the
    determination of the price at which products that will be offered
    for sale considering the various objectives of the firm.
     
    Pricing Objectives

    Before setting price, the firm’s pricing objectives must first be determined.
    Pricing objectives may consist of any of the following:
    1. Profit-oriented objectives;
    2. Sales-oriented objectives; or
    3. Status qou-oriented objectives.
    The Pricing Procedure
    The pricing procedure refers to the series of steps adapted in the
    determination of price. The series of steps are the following:
    1. The determination of the realistic range of choice;
    2. The selection of pricing strategy;
    PRICING STRATEGY

    Skimming price – strategy a company initially sets a high price for the
    product and at the same time promotes it heavily via advertising and sales
    promotion. Eventually the firm lowers the price to capture a larger share
    of market.

    Penetration pricing – company prices its products low in order to


    penetrate its target as quickly as possible and thereby gain market
    control.
    The evaluation of economic feasibility; and
    The setting of the price.
    Pricing Approaches
    Prices of products and services may be set based on any of the various pricing approaches. They are the following:

    The cost based approach in pricing refers to the setting of prices on the basis of costs. Under
    this approach the total costs are calculated and margin of profit is added. There are two types
    of pricing under cost based approach. They are the following;
    1. Cost plus pricing this method calls for adding a percentage of cost on top of the total cost.
    Price= direct costs + overhead costs+ profit margin
    Example: if direct costs is 75, overhead costs is 25, and profit margin is 25 of total costs
    what is the selling price?
    2. Target rate of return pricing this approach enables a company to establish the level of
    profits that it feels will yield a satisfactory.
    Price= direct unit variable costs+ fixed costs/standard unit volume + rate of return
    desired, capital (total operating assets) employed.
    Example: if a company’s direct unit variable cost is 75, fixed costs are estimated to be
    2,500,000 on a standard volume of 100,000 units; a 25% return on a capital of 10,000,000 is
    required. What is the selling price?
    2. Buyer based approach of pricing deals with consumer
    perceptions or behaviour as bases for determining the selling price
    of a product or service. This approach is composed of the following
    methods:
    • 1. perceived value pricing
    • 2. price-quality relationship pricing
    • 3. loss-leader pricing
    • 4. odd-numbered pricing
    • 5. price lining pricing
    Perceived Value Pricing. This method established the price for a product based on the
    buyer’s perceptions of the value of the product or service. Most works of art, like
    painting and sculptures, are sold at prices based on the buyer’s own value analysis. Costs
    has little to do with selling price.
    Loss-leader Pricing. This refers to the practice of setting low prices on selected products
    which will result in the generation of less profits, but with the objective of increasing the
    sales volume of other products sold the company.
    Odd-Numbered Pricing. This refers to the practice of setting price even below peso
    amounts. An example is selling at 99.50 rather than at flat 100. There are good reasons
    for this method:
    Price Lining Pricing. This method refers to the practice of selling merchandise at a
    limited number of predetermined price levels. The different price levels are intended to
    represent various levels of quality. The buyer is then provided with various buying options
    increasing his chance of making a purchase. The various models of handy phones offered
    for sale at varying prices by manufacturers, like Nokia, Samsung, and Sony Ericson are
    example of price lining pricing in action.
    Competition Based Approach
    The competition based pricing approach refers to the setting of prices based on what
    prices are being charged by competitors. There are two kinds of pricing under this
    approach. They are the following:
    1. going –rate pricing; and
    2. sealed bid pricing.
    Going-Rate Pricing.
    Under this pricing method, the firm adapts a price based on the competitor’s price. The
    price adapted may be a little higher or lower than the competitor’s. Less attention is
    given to the firm’s own costs and demand.
    Sealed Bid Pricing.
    In sealed bid pricing, the firm sets its price which is thought to be a little lower than the
    competitor’s. This happen in biddings where competitors outdo each other in winning the
    bid. As in going-rate pricing, less attention is also given to the firm’s costs and demand.
    Price Adaptation Strategies.

    Price adaption strategies are those that are used to address the
    variation in geographical demand, cost, market segments, purchase
    timing, and other factors, the strategies consist of the following
    • 1. Geographical pricing
    • 2. Price discounts and allowances
    • 3. Promotional pricing
    • 4. Discriminatory pricing
    Geographical Pricing.

    Geographical pricing refers to pricing decisions related to product


    intended for customer in different locations. The cost of shipping is
    a primary consideration which led to the following strategies.
    1. point-of-production pricing
    2. uniform delivered pricing
    3. zone-delivered pricing
    4. freight-absorption pricing
    Point-of-production pricing refer to the situation where the seller
    quotes the selling price at the point of production, and the buyer
    selects the mode of transportation and pays all freight cost.
    Under uniform delivered pricing, the seller quotes to all buyers the
    same delivered price regardless of their locations.
    In zone-delivered pricing, the seller sets prices that are different from
    zone to zone.
    The freight-absorption pricing is that strategy where the seller pays
    for some of the freight charges in order to penetrate more distant
    markets.
    Price Discounts and Allowances

    Discount and allowances are price modifications designed to


    reward customers for early payment volume purchase, and
    offseason buying. Discounts are reduction from the list price that
    are given by sellers to buyer who either give up some marketing
    function or provide the function themselves. Allowances are
    reductions in price given to final consumer, customer or channel
    member for doing some tasks or accepting less service
    Discounts are allowances are classified as
    follows:

    1. Cash discount. These are reduction in price to encourage buyers


    to pay their bills quickly. An example is the one-hundred-peso
    discount offered to monthly instalment dues of a customer if he
    pays on or before due dates.
    2. Quality discounts. These are reductions in unit costs for a larger
    order. For example, a firm may sell its products at 1,000 per box
    containing 10 units 1,900 per box containing 20 units and 2,700 per
    box containing 30 units.
    3. Functional or trade discounts. These are reductions from the list price
    given by the manufacturer to reward wholesalers and retailer for
    marketing functions they will perform like selling, storing, and record
    keeping.
    4. Seasonal discount. These are price reductions given to buyers who buy
    goods or services out season. This type of discount is designed to help the
    manufacturer maintain production even during seasons of low demand.
    Allowance. These are reductions from list prices to buyers for performing
    some activity. Allowances are of two types:
    a. Trade-in allowance. This is a price reduction given when a used product
    is part of the payment on a new product.
    b. Promotional allowance. This is a price reduction granted by a seller as
    payment for promotional services performed by buyers.
    Promotional Pricing

    Promotional pricing refers to the temporary reduction of prices of a


    company’s products. Price reductions take the form of any of the
    following:
    1. Sale. This is the form where the prices of the products of the firm are
    reduced for a limited time.
    2. Special event pricing. Under this form, special prices in certain seasons
    are made to draw in more customers.
    3. Cash rebates. These are offered to customers to encourage them to
    make purchases within a specified time period.
    4. Low-interest financing. This involves low-interest financing to
    customers.
    5. Warranties and service contracts. These involve adding free warranty
    offer or service contract
    Discriminatory Pricing

    Discriminatory pricing refers to modifications of the basic price to


    accommodate differences in customer, product, and locations. The
    company sells its products or service at two or more prices.
    The forms of discriminatory pricing are as follows:
    1. Customer segment pricing- different prices for the same product
    or service are charged for different customer groups
    2. Product form pricing- different product version is priced
    differently without considering costs.
    3. Image pricing- identical product but with different images are
    priced at two different levels.
    4. Location pricing- different locations are priced differently even
    if the cost offering each location is the same
    5. Time pricing- price varied by season, day, or hour, example are
    telephone companies charging different rates on different days and
    hours
    Pricing Under Various Market Conditions

    • Pricing Under Various Market Conditions


    Knowing the price of the competitor’s product is important but anticipating
    his pricing behaviour may even be more important. Economists have put
    forward same concept in market structures of competition. The kinds of
    competitive situations are the following:
    1. pure monopoly
    2. oligopoly
    3. pure competition
    4. oligopsony
    5. monopsony
    THANK YOU!!!

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