PRESENTATION ON TOPIC

PRICING POLICIES FOR THE SUBJECT OF

INDUSTRISL MARKETING

HARISH KUMAR 8TH SEMESTER ROLL NO. 36

Crucial to a good marketing strategy is a good pricing policy. For the prices you charge for your products and services will greatly affect your sales volume, profit levels and among other things, your business image.

Pricing policies are evolved to adjust the base price of a product. FOR EXAMPLE: electric motor is a product with different horse power ratings, with different speeds and different applications. It is therefore, necessary for a manufacturer of electric machine to set the base price for a machine.

To establish an effective pricing policy: 1. Define your pricing objectives 2.Establish a simple yet effective price structure taking into consideration all your business costs. 3.Choose a pricing strategy to establish a market presence. 4.Fine tune and adapt your general pricing policy in response to trends, industry practices and new innovative pricing strategies to help solidify your competitive position within the marketplace.

While setting your price objectives consider how your prices will influence the following six factors:
Sales volume
Sales revenue Market share

Competitive position
Company image Profitability

Sales volume is highly dependent on the prices you charge. Generally higher prices mean lower volume and viceversa. However, small businesses can often command higher prices because of the more personalized services they can offer.

Sales revenue
Setting Prices , including credit policies, is a major factors affecting total revenue. Usually when you increase the price of your product you can expect responses to decrease by a percentage equal to the amount of the increase. However , a one dollar may not necessarily get twice as many sales as if the item sold for two dollars. To maximize your revenue you must therefore test and research what consumer willing to pay.

Market share
Your price will determine to a large extent your percentage of market share compared with your competitors. Lower price usually means a large percentage of the market share.

Competitive position
Prices will affect how your product or services stands in relation to competitive products. Occasionally you might use cheaper than normal price to introduce products or services to get consumer attention and improve your market position. .

Company image
Your prices will create an image in your consumers mind. They will see you as a discounter, general retailer or Rhodeo type operator. Discounter sell at the lowest possible price and strives for a high volume of units sold while the Rhodeo type operator strives for high profit per sale on a lower volume.

Profitability
Your price will affect the profitability of you company. The most profitable price can be found by testing the market with different prices on the same product. A high price will give you more profit per sales but fewer sales. A low price will give you less profit per sales but more sales. Somewhere in between lies the perfect balance beteween profit per sales and volume of sales.

 Cost Demand Competition Experience Customer expectations Profit goals

Cost
Price your products services according to your cost structure. Your price structure must account for all the fixed and variable costs of conducting your business. FIXED COST: Fixed cost generally refer to you operating expenses. These costs are classified as fixed because they usually do not vary with your volume of business. They include cost for wages, management salaries, rent utilities, office supplies, insurance and many other cost attributed to the operation of your business. VARIABLE COST: Variable cost generally refers to your costs of your goods. These costs are classified as variable because they increase or decrease depend upon the amount of goods, materials and supplies you purchase.

Competition
Price your product or service according to what the competition is charging. Since your products or services are competing in the market place, you must know exactly what the competitors is doing before you can finalize your pricing policies. To get detailed information about your competitors pricing policies, send in a friend, make some BLIND phone calls.

Customer expectations
Price your products and services according to the expectations of your customers. Some buyers are very price conscious other want knowledgeable and convenience sales personnel. Because of these variations you need to learn about your customers desires and expectations in relations to kind of your products to price them more effectively.

Demand
Price your products or service according to how may people want it and how badly and quickly they actually need it. Obviously, if there is a large demand for your product and services and youre the only the one on the selling, you can pretty much charge what you want.

Experience
Price your product or services according to what people have been willing to pay for it in the past.

Profit goals
Price your product and services according to your profit goals. Naturally your price should motivate customers to buy, be competitive and cover selling costs.

A written price objective usually centers around one or a combination of the above six factors. Hence when writing the price objectives include a qualifying statements, such as: Increase sales volume Increase sales revenues Keep or building market share Meet or preventing competition Target low cost buyers Increase profit or return on investment

IN GENERAL, the prices you charge for your products or services will depend on: How much you pay for inventory or supplies. Your operating expenses. Your profit goals. Your price will also influenced by : Competitive pressures Industry standards The perceived value of your products services in the eyes of your customers.

There are various 8 strategies to expand and improve your basic pricing policy: 1.) Avoid advertising the prices of expensive items : If for example you use classified ads to promote an item that cost more than $100 it is preferable not to include the price of the item in the ad. Send a direct mail package that has the power to convince a prospect to buy. 2.)Do not lower prices without a good reason : Dropping prices without an explanation usually means you were unable to compete at the higher price. It does not mean you are giving your buyer a bargain. Consumers catch on quickly to this and may avoid your products and services.

3.)Give discounts to distributors or customers who make large orders: encourage large order with bargain bulk purchases. Discounts to distribution channels(brokers, wholesaler & retailers) may also be needed to get your products distributed to your markets. 4.)Give discounts for early and prompt payments from credit customers: Discount to credit customer can improve collection rates and reduce your average account receivable collection period, thereby improving cash flow. Discounts are usually stated on invoices and sales orders. 5.)Increase prices when budget projection warrant it: Random price increases can drive away business and destroy goodwill. However, when your budget projection warrant , it is essential to make increases. Waiting to long to increase prices , can destroy your business .
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6.)Monitor your gross margin: Gross margin is calculated by divided your gross profit by your total sales. The value can then be used as a monitor for your sales-purchasing department. The gross margin calculation allows the manager to buy goods that can be sold at higher than the desired margin. 7.)Offer a rebate: If you manufacture goods, overestimate demand , and hence have more goods than you can reasonably sell at reasonable prices, consider offering a manufacturers rebate to encourage sales. Rebate can also be used to discourage the competition from getting a foothold in the marketplace. 8.)Split an expensive price into three or four easy payments: This is a favorite strategy among TV direct and mail orders sellers as it creates the illusion of a cheaper price and allows customers to spread out their payments. A product with a list price of $59.85, can be split into three payments of $ 19.95plus shipping and handling and taxes.

Questions

Thanks !!!!