M IN O R PR O JEC T R EPO R T

ON

E F F EC TIVE PR IC IN G S TR ATE G IES FO R IN TR O D UCIN G N EW

PR O D UCT IN TH E M AR K E T

Submitted in partial fulfillment of requirement of Bachelor of Business

Administration.

BB A- II S em ester (2nd S hift)

Batch 2023 -2026 :

Submitted to: Submitted by:

M s. Preeti Singh Aastha Bhatia

Assistant Professor 35925501723

JAG AN N ATH IN TER N ATIO N AL M AN AG EMEN T SCH O O L

( KALKAJI )

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 Undertaking

I hereby certify that this is my original work and it has never been submitted elsewhere.
I further declare that the findings in this project report are independent study done by
me under the guidance of Ms PREETI SINGH.

Aastha Bhatia

35925501723

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 Certificate

This is to certify that the study conducted by Aastha Bhatia entitled E F F E CTIVE
P R ICIN G S TR ATE G IE S F O R IN TR O D UCIN G N E W P R O D UCT IN THE M AR K E T
being submitted in the partial fulfillment of BBA 2023-26, GURU GOBIND SINGH
I N D RA P RA S T HA UNIVERSITY, is faithful record of the bona-fide research work carried
out by him under my supervision and guidance. This minor project report is his original
work and has not been submitted to this or any other university/ institution for the award
of any other degree or diploma.

M s. PREETI SINGH

Assistant Professor

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 Acknowledgement

My first and foremost gratitude to my mentor, MS. Preeti Singh for her guidance, support
and encouragement during the completion of this project. The minor project would not
have been possible without her supervision, motivation and most importantlyher
inspiration.

I am extremely grateful to the respectful Director, Head of Department and faculty of

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL, KALKAJI, for their
motivation, support and encouragement throughout the completion of this project.

I would also like to thank my family and my peers in helping me all along the completion
of this project, and providing me with the inspiration.

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 Table of Contents

[Link]. Description Page No.

I. Undertaking 2

II. Certificates 3

III. Acknowledgement 4

IV. Table of Content 5

V. List of Tables 6

VI. List of Figures 7

1. Chapter 1 Introduction 8-24

2. Chapter 2 Objectives of the study 25-26

3. Chapter 3 Review of Literature 27-32

4. Chapter 4 Research methodology 33-36

5. Chapter 5 Analysis and Interpretation of Data 37-50

6. Chapter 6 Limitation of study 51-52

7. Chapter 7 Conclusion 53-55

8. Chapter 8 References 56-57

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 List of Tables

Table No. Description Page No.

1.1 Difference between Primary and secondary sources 36

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 List of F igures

Fig No. Description Page no.

1.1 Pricing Strategies Matrix 24

4.1 Data collection sources 34

5.1 Cosmetics 41

5.2 Price VS Optimum 42

5.3 Price Beam Isometric 43

5.4 Product Segmentation 44

5.5 Demand: Quantity VS Revenue 45

5.6 Demand: Quantity VS Revenue-II 47

5.7 International Price Management 48

5.8 Assortment optimization 49

5.9 Promotional optimization 50

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 Chapter 1

Introduction

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 Introduction

Setting a price for a product or service can be a challenge, as many variables factor into
determination of a price. Additionally, accurate pricing can be based on values that can
be difficult to know without extensive research. As a result, many companies make
costly mistakes when incorrectly attempting to price a product or service. A large portion
of pricing is determined by the customer segment a company is targeting or the market
it is entering. It is important to have strongly supported and reliable knowledge of a
targeted customer segment before determining price. The Extension publication Starting
a New Business: Pre-Launch Research, E C 495, can help with preliminary business
research. It will help identify the characteristics, demographics, and buying habits of the
targeted customer. It is strongly suggested that this document, or other materials on
business and customer research, be used as a reference to the pricing tactics
introduced in this circular. This publication serves as an introductory guide for pricing
products and services. It presents some important terms and metrics that can be used
when analyzing price. It also introduces some methods for determining a price. While
the principles suggested in this curricular can be used for most products and services,
there are some instances where the business objectives also affect price. They, too, are
described in this document. Throughout the curricular, examples are provided to further
demonstrate the curriculum presented.

Im portant Term s

This section introduces some important terms that should be used when determining
pricing. While some terms may not be relevant for all products or services, it is
important to be familiar with all terms and how they may apply to your business
situation.

Revenue

Revenue is defined as the total amount of money a business receives from sales and
investments. If a business does not offer credit nor has other investments, revenue is

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equal to sales, and the terms can be used interchangeably. Most companies closely
track sales, as they are an indicator of a healthy business. Total Revenue is equal to the
price of the goods or services multiplied by the quantity of units sold, as demonstrated
in the equation below:

R = Price x Quantity

Costs

Costs are anything that contributes to the expense of the product or service provided
by a business. When evaluating price, it is important to know all costs, as they are a
significant variable for business profitability. In the equation for Profitability, P, the R
stands for Revenue, and C stands for Costs:

P=R–C

Revenue is the product of price and units sold. Knowing costs as well as other variables
in this equation (e.g., projected unit sales at a certain price point) can help predict
expected profitability. Knowledge of costs can also be used for terms like Contribution
Margin (to be discussed later), which can be used to determine or evaluate a specific
pricing strategy. Costs are typically broken down into two categories — Fixed Costs and
Variable Costs. • Fixed costs are costs that are set, and neither change with different
business functions nor how many sales a company makes. Sometimes referred to as
Overhead or Overhead Costs, they are often incurred over time, such as rent,
insurance, etc. Fixed costs can also include one-time costs associated with launching a
new product or service. • Variable costs are any costs that vary with the number of
products produced. This includes production costs, as well as any cost that applies to
each individual sale. Below are other examples of fixed and variable costs. Contribution
Margin Contribution margin is a measure of product profitability on a unit basis. It is
calculated by subtracting variable costs per unit from selling price. Fixed costs are
ignored for this calculation. Contribution Margin = Price - Variable Costs Contribution
margin is useful when a company is not sure about its fixed costs, or is operating in a
quickly changing company landscape (a situation encountered by many startups and

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new ventures). It can also be used to perform a Break-Even Analysis (see on page 3).
Break-Even Analysis When selling a product with a positive contribution margin there is
a point at which revenue is equal to expenses — this is the Break-Even Point. Any sales
after this point represent profit for the company. It is important for companies to know
this point, as it will help determine realistic sales projections and strategies.

There are many different kinds of fixed and variable costs. When calculating price, it is
important to have a list of all costs (both fixed and variable) that go into a product.
F ailure to do so can lead to inaccurate pricing, and even lost profitability. Some
examples of both fixed and variable costs are:

F ixed Costs

• Research and development

• Equipment (e.g., machinery)
• Indirect labor (i.e., used for general company operations)
• Insurance
• Rent
• Some forms of marketing (brand establishment, advertisements, etc.)
• W eb hosting

Variable C osts

• Raw Materials
• Direct labor (i.e., used to assemble a product)
• Some marketing expenses (commissions, rebates, etc.)
• Credit card fees
• Shipping

As you might have noticed, some examples (such as labor or marketing) can be
considered either a fixed or a variable cost. How you classify these costs depends on

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their function and how they relate to the overall product. For example, labor used to
directly manufacture or assemble a product is a variable cost. Labor used to run
operations for a company (e.g., a safety officer) would be considered a fixed cost.

When compiling costs, it is important to have a complete list of costs that are correctly
classified by type. This will become important later when fixed and variable costs are
used somewhat differently to calculate terms like contribution margin and break-even
point.

Pricing Strategies

Cost-Based Pricing (Cost-Plus Pricing)

A basic method that can be used to determine price is one based on cost, often called
Cost-Plus Pricing. With this method, the first step is to accumulate all fixed and variable
costs. The next step is to estimate sales and determine fixed costs on a unit basis. The
final step is to sum up variable and unit fixed costs and add a set profit margin to
determine final price. The appeal of this method is that it is simple and does not require
extensive research or efforts to calculate. In general, cost-based pricing is not
recommended because it has many risks. First, this method does not consider
perceived customer value so it is possible to determine a price that is out of sync with
customers. Cost-based pricing can also be risky if one does not estimate costs
accurately. For example, if a business overestimates the amount of product sales,
which is possible due to failure to research perceived customer value, then the
product’s fixed costs per unit sold will be much higher than expected and the pricing
scheme might not be profitable. Additionally, if costs suddenly change (e.g., due to
commodity price fluctuations), a pricing scheme might not be viable. As a result, cost-
based pricing is usually not recommended except for very large value, low volume
sales.

Value Based Pricing

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The most effective way to price an object is based on the value it creates for customers
and the customers’ perceived worth. Referred to as Value-Based Pricing, it requires
significant knowledge of a company’s customers and their needs. To calculate value-
based pricing, one must compile all value propositions created by the product and
calculate a monetary amount for each. Value propositions may include items such as
the cost to replace a current product, labor, or costs prevented by a new product, or any
other values created by the product for its end user. While other factors can indirectly
affect price (e.g., customer knowledge of a product, competitive landscape, etc.), price
should still be directly proportional to the value created. Value-based pricing can be
challenging. Errors of overestimating or underestimating value can be problematic for a
business. If a company does not capture all value statements, it runs the risk of losing
profitability or leaving money on the table. If a company overestimates the value created
by a product or service, or customers are not knowledgeable of all the value created,
the price will be set too high, thus leading to lost sales. As a result, many businesses
will try an initial price and then use customer feedback to hone in on a more accurate
figure. While value-based pricing does not directly use concepts like costs or break-
even point for determining price, these terms can still play an important role in pricing.
Knowing costs can determine overall product profitability for a given price. Additionally,
these terms can serve as a check for a proposed price and whether it fits into an overall
business strategy. One optional step for value-based pricing is to examine all costs and
confirm that the ultimate price will create profitable outcomes for the business.

Retail Pricing

There are many instances when a business will not sell directly to a customer. The
business will instead sell products to a retail business, which in turn will sell them to
customers. Although retail businesses do not have the manufacturing costs described in
earlier examples, they will have labor and overhead costs that must be covered when
setting prices. As a result, they do not pay the same price a retail customer does. The
term Wholesale Price refers to the price a retailer pays for a product. Retail Price refers
to the price that a retailer sets for its customers. G enerally, these two prices are directly
related. The retail price is usually determined by multiplying the product’s wholesale

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price by a set percentage. The term Markup is used to refer to this relationship. Retail
price is typically two times the wholesale price, or a 100 percent markup. The
occurrence is so common that the term Keystone Pricing has been branded to describe
it (though high-end retailers, and others, may use different markup values). G enerally,
the retail price should reflect the value of a product to customers, and should be set
accordingly. One effective tactic that businesses use is to employ value-based pricing to
determine the retail price and then use a set markup value to determine the wholesale
price. The formula below can be used to determine wholesale price using this method.

W hole Sale P rice: R etail P rice (including shipping) 100 % + m arkup percentage

W hat Is a Pricing Strategy/Pricing M odel?

Most marketing guides use pricing strategy and pricing model interchangeably. There
are some key differences that you should keep in mind.

A pricing strategy is how the seller uses pricing to achieve a certain business objective.
It deals with the psychological reaction that a consumer has towards certain kinds of
prices.

A pricing model, on the other hand, is how the seller goes about implementing the
pricing strategy. Pricing models are usually specific and quantitative in nature. Here are
some of the most common pricing models:

 Hourly: You charge an hourly rate (e.g., $40/hour) and then bill the client for the
total number of hours worked.

 Project-based: You charge a flat rate for the entirety of the project (e.g., $5,000
for a website). 

 Retainer: You charge a monthly fee for on-going deliverables (e.g., $300/month
for search engine optimization).

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  Performance-based: You charge a rate based on the results you produce (e.g., 
$100 per key performance indicator reached).

 Cost-plus pricing: You charge for the production costs (e.g., $10 to make a shirt)
plus a profit markup (e.g., 100%, or total $20).

The Four Cs of Pricing Your Product

Pricing strategies work best when they take into consideration the four major pillars of
pricing. These are customers, current positioning, competitors and costs. Keep the four
Cs in mind when choosing the best pricing approach for your business.

Custom ers

Who is your target market? What is your ideal customer's disposable income range?
How much would that customer be willing to pay for your products and service? Will
pricing your products/services impact your customers’ purchasing behavior or attitude
towards your brand? What kind of pricing strategy speaks to your target customer the
best? How does it align with your brand image and what type of value does it
communicate?

Current Positioning

What is your brand identity? Which parts of the market are you catering to with your
marketing efforts? Are you known as a budget or low-cost alternative, or are you a
luxury business with elite clients? Are you a relatively unknown startup, or does your
company already have a hold on the market? Your products and services need to be
priced accordingly. The more luxury your offerings (or the more established you are as
a company), the more you can demand from your customers. This is not to say you
should necessarily " price high." Your product and pricing need to work together in order
to create the image that you want.

Com petitors

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How much are your competitors charging? If your competitors raise or lower their
prices, how would that affect your sales? Are your products/services comparable, or do
you offer something special for the same cost? You can use your competitors' prices as
a benchmark. Always take note of any major differences that allow you to be more
flexible on your price.

Costs

It’s simple math—you can’t profit if you’re spending more than you bring in. Always take
into consideration production costs (how much it costs to produce a product or service)
and fixed costs. (What you have to pay regardless of how many units you sell—e.g.,
marketing, rent, staffing, other operating expenses, etc.). A common method for this
using cost plus pricing. Determine your costs, then determine how much additional you
want to charge on top of that.

The Four Main Pricing Strategies You Should Know

There are dozens of strategies in existence. There are four basic strategies that provide
the foundations for more complex pricing. These are: economy pricing, penetration
pricing, price skimming and premium pricing.

Pricing Strategy Exam ples: #1 Econom y Pricing

Under the economy pricing strategy, your company charges as little as possible to
entice the largest number of potential customers. This works by lowering operating and
production costs as much as you can. Because your profit margins are usually lower,
you also have to focus on volume.

This pricing approach is most commonly seen at dollar stores. It's also common at chain
supermarkets like Target or W almart. However, if you’re a small business, this tactic is a
bit tricky. You may not have the volume, market share, or brand awareness to set your
products and services at the lowest possible price to reach that target customer.

Pricing Strategy Exam ples: #2 Penetration Pricing

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If you’re a relatively new business, you may want to consider pricing for optimum market
penetration. This means that you initially sell your product or service at a low
introductory price. This will attract new customers. Then raise prices one you’ve
secured your share in the market.

You can see this pricing strategy at work with telecommunications or cable companies.
They’ll initially charge a lower-than-market rate for the first month or so. This will entice
customers to sign up for their services. There are two potential downsides to this
strategy. First, your profits will take a hit. Second, some customers may not buy into the
higher price.

Pricing Strategy Exam ples: #3 Price Skim m ing

Think of price skimming as the opposite of penetration pricing strategy. You start with a
higher initial cost, and then lower the price over time. This occurs as consumer demand
falls and newer goods take over the market. This is a great way to cover production and
marketing costs early. It also reinforces the idea that your brand is one of quality and
luxury.

Price skimming is very common in the tech/electronics industry. Whenever a new

flagship phone from Apple or Samsung comes out, prices are high. However, if a
customer buys the same phone a year or even just a few months later, they could get it
at a much lower price.

Pricing Strategy Exam ples: #4 Prem ium Pricing

It may seem counterintuitive to price your product at a premium price point. Customers
can actually respond positively to higher prices. Because only a few people can afford
them, expensive products create the illusion of exclusivity, status and quality.

You can opt for a premium price if your product or brand has a competitive advantage.
The trade-off is that though your business will likely sell fewer units. The high profit

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margin should be able to make up for loss of volume. Premium pricing can be found in
most industries. This includes restaurant and hospitality to automotive to fashion.

Other Kinds of Pricing Strategy

While economy, penetration, skimming and premium pricing are the most common
pricing strategies, they’re not the only ones you can use. Below are eight more
approaches that could benefit your business.

Psychological Pricing

Also known as charm pricing, psychological pricing takes advantage of the fact that
humans are emotional by nature. W e respond to things emotionally and impulsively
rather than logically.

The biggest example of this is when sellers mark their prices as $0.99 or $0.75. This is
rather than rounding up to the nearest whole number—like when an item costs $99.99
instead of $100. This is because we see and react to the first set of numbers. W e
immediately think it is cheaper, even though there’s a negligible difference in cost.

Bundle/Product Line Pricing

If you have a range of products or services that complement each other, you can bundle
together products. This may allow you to charge a lower price than if customers bought
them individually. This is called bundle pricing. This is a great way to get rid of stock,
move products and encourage more spending.

Retail brands will bundle together related items. Service providers have package deals
if you get multiple services at one time. The tricky part of product line pricing is that you
have to make sure that your profit loss doesn’t outweigh how much you earn by pushing
multiple products at the same time.

Prom otional Pricing

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Promotional pricing is also known as discount pricing. You sell your products or services
at a discounted rate for a short period of time. This could involve slashing off a
percentage of the price. This provides vouchers or coupons, launching two-for-one
deals or giving away free items with every purchase.

Promo pricing follows the idea that some profit is better than no profit. W e recommend
using this strategy on high-volume periods (e.g., the holidays). It also works at the end
of the season when moving products out of inventory is a higher priority than pure profit.

G eographical Pricing

If you are a local business, then geographical pricing isn’t for you. But if you’re an
international company that sells all over the world, then this pricing approach is very
relevant.

With geographical pricing, you price your goods and services according to geographical
factors such as cost of living, average income, legislation, taxes, and of course, supply
and demand. For example, gas stations in a busy urban area are likely to have different
prices than similar stations in a rural town.

Captive Product Pricing

This pricing strategy works best if customers have to keep buying from you to continue
using your products. Examples of this are shaving products and subscription services
like the Dollar Shave Club. Once you buy a razor from a particular brand, the customer
will have to keep buying blades and other accessories from you since other brands
won’t be compatible.

You can charge a low price for the initial buy-in (e.g., ra zor handles, printers), and then
make up for any profit loss through the renewables (e.g., blades, printer ink).

O ptional Product Pricing

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You might be familiar with optional product pricing through another term: upselling. With
upselling, you can tack on extra services or products for a slightly higher cost. You see
airlines using this strategy all of the time, with extra charges for optional services such
as baggage, priority check-in, in-flight meals and exit row seats. The idea behind this is
that it’s easier and more profitable to convince a current customer to spend more than it
is to try and attract a new customer.

Value Pricing

Value-based pricing means basing your prices off how much value your customers feel
they are getting when they buy your product or service, instead of deciding prices based
on how much a product or service costs to make. The idea behind this is that customers
are willing to spend more money on something that they feel is worth it and provides
them with value.

For example, a T-shirt may cost just $5 or $10 to produce. But because there’s some
value attached to the style and brand, some companies may charge as much as
hundreds or even thousands of dollars for it.

D ynam ic Pricing

Dynamic pricing is a pricing strategy that’s variable instead of fixed. This means that,
depending on the time or other external factors, prices can and will fluctuate. You see
this often in the tourism industry—hotels and airlines usually charge higher rates during
peak season and will lower their rates when there is less consumer demand.

Flexible pricing systems often use technology to generate the best rates depending on
market factors. While this makes it easier to maximize profits, gathering the data
necessary to implement dynamic pricing may be too time-consuming or expensive for
small businesses.

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Pricing Strategy Benefits
There are several benefits to using pricing strategies like the ones above. Some of
these benefits include:

 Allowing for increased margins on higher priced items. In the case where your
margins are based on the initial sale only, using a pricing strategy that
encourages recurring purchases will yield higher profits.

 Increasing competitiveness. When everyone else in your industry is jacking up

prices and cutting discounts to maximize short-term profits, it might be time to
rethink your approach. Using a pricing strategy that entices customers to keep
buying from you will make your business more competitive and increase
customer loyalty.

 Price flexibility. By using geographical pricing, captive product pricing and

dynamic/flexible pricing, you can charge customers different prices based on
certain criteria.

 Simplifying your marketing messaging. If your marketing message focuses on

value and benefits rather than price, you can make it easier for customers to
understand and trust your brand. 

 Reducing customer price resistance. When your customers feel that they’re
getting a good deal, they’ll be more likely to trust and buy from you. 

There are many benefits to having a good pricing strategy. By using one or more of the
pricing strategies discussed above, you can increase your profits and grow your
business.

Key Takeaw ays

The right pricing strategy will help you get more customers and increase your profits.
But what works for one company may not necessarily work for you—even if they’re in

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the same industry. It’s important to take a look at your specific marketing strategy and
circumstances before choosing the most effective price strategy.

B usiness O bjectives

A business will have varying objectives based on business status, health, and other
circumstances. These objectives can affect how a business sells products to its
customers, and in return, will have an indirect effect on price. Since there is not a direct
correlation between business objectives and pricing, there is no equation to model how
they affect pricing. However, it is important to be aware of these situations so that a
company can respond appropriately.

Maximizing Profitaility

For many companies, the goal when setting price is to maximize profitability. To affect
profitability, pricing can be used to influence either the number of units sold or costs. For
example, some companies will employ a strategy to sell more units at a lower price,
even if it means less revenue per sale. This occurs because a company can often
receive discounts from suppliers for buying in large quantities. This concept, referred to
as Economies of Scale, is sometimes employed by companies to lower costs and
increase profitability, even if it decreases revenue slightly. Before attempting this
strategy, a company must be able to produce and sell the needed quantities, be aware
of its own capabilities, and be knowledgeable about customer demand.

Promoting Future Sales

Companies may choose to sell products that Many products that lead to further sales
and business are sold. This is especially true of base products that require additional
products or accessories to function in the future (e.g., printers and ink cartridges). To
increase profitability, companies will often try different pricing schemes to ensure future
or repeat customers. Sometimes a company will sell a base product for less than its
actual value, or even for a loss, knowing it will lead to future sales or revenue. For
example, soda manufacturers will often highly subsidize or even give a soda fountain to

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restaurants, in exchange for a contract to buy soda from that producer. In return, these
restaurants, which purchase large volumes of soda, will buy enough product to more
than make up for the initial losses the producer has incurred. Inversely, some
companies may offer a base product at a higher premium with the enticement of lower
ongoing costs for the complementary, add-on products.

Switching Cost

Switching Cost is a term used to measure how easy or difficult it is to switch to a

competitor’s product or service. Going back to our printer example, once a person
purchases a printer, he or she is then required to buy printer cartridges that fit that
model, usually from the same manufacturer. The only way to buy cartridges from a
competitor is to buy a whole new printer. This is an example of high switching cost. The
general rule of thumb is that the lower the switching cost, the more important it is have
pricing comparable to competitors’ pricing. It is also worth noting that switching cost
refers not only to the financial costs of switching to a competitor’s product, but also to
the time and effort involved with switching. For example, if a customer puts a lot of time
and effort into learning how to use a product, he or she will be more reluctant to switch
to a competitor if the process has to be repeated. Beating Out Competitors Almost
every business has competitors with whom it is competing for a finite number of
customers and sales. To succeed, a business must distinguish itself from its
competitors. One tactic businesses use is lowering their price to be in line with or lower
than a competing product. While lowering price is one way for a business to compete, it
is not the only method, or even the best tactic, for differentiating or setting its product
apart from competitors. Other methods businesses can use for differentiation are
product quality, features, or customer service. Some companies successfully set
themselves apart by pricing above their competitors and causing their products to be
perceived as luxury or high quality, a tactic sometimes referred to as Premium Pricing.
The best way to address competition is through extensive research of competitors, as
well as evaluation of one’s own business. Having a clear idea of strengths and
shortcomings compared with competitors will guide a business to the best strategy for
differentiation and pricing.

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Gaining Exposure/Entering a New Market

When entering a new market, it is sometimes more important to increase sales and
market share than to maximize profitability. Lowering price can be an effective method
to attract new customers. This can lead to additional customers trying a product and
staying loyal to it in the future. There are some risks that should be taken into account
before attempting this pricing strategy. First, lower prices mean lower profitability. A
company needs to ensure it has the cash flow to sustain a low profit margin for an
extended period of time. Additionally, when a company returns prices to a higher,
normal level, it can lead to customer backlash. Finally, lowering prices can encourage
competitors to follow suit, leading to a costly price war. It is important to consider all
these variables before attempting this pricing strategy.

Fig 1.1

24
 Chapter 2

O bjective of the S tudy

25
The objective of the study

 To understand the various pricing strategies applicable for Business.

 To understand the concept of introducing new Product in the market.
 To learn about the cosmetic sector’s challenges for introducing new Product and
their adopted pricing strategies.

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 Chapter 3

R EVIEW O F LITER ATU R E

27
R eview In Literature

D E F IN ITIO N Tanya Sam m ut-Bonnici and D erek F. C hannon

Pricing strategy is the policy a firm adopts to determine what it will charge for its
products and services. Strategic approaches fall broadly into the three categories of
cost-based pricing, competition-based common factor among pricing strategies is that,
in the end, the total revenue generated from the price set multiplied by the units sold
has to cover the costs of operation and to allow a sufficient profit margin, which secures
an acceptable return on investment. The process of doing this differs according to
industry and market conditions, the underlying available competitive advantage, and in
some cases regulatory constraints. Pricing strategy is a key variable in financial
modeling, which determines the revenues achieved, the profits earned, and the
amounts reinvested in the firm’s growth for its long-term survival.

C O N CEPTU AL O VER VIEW

There are several options open to the firm in assessing pricing strategies, which are
significantly influenced by a number of key factors. Given the customers’ demand
schedule, the cost function of the business, and the pricing strategy of competitors, a
number of pricing strategy options are available, including those mentioned in the
following text. Markup pricing. The most common strategy used involves adding a
markup on the product costs. Many companies compute the cost of producing a product
and add a specific margin. Retail corporations such as Auchan, C arrefour, and W al-
Mart adopt a markup pricing strategy on the majority of brands retailed through their
stores (except in the case of promotional pricing strategies, described in the following
text). Target return on investment pricing. In industries that require a high capital
investment, target return on investment pricing is adopted as a safeguard to recuperate
the costs of setting up complex infrastructure. The formula used to calculate the price
includes a percentage return on investment that varies with different volumes of
production in a given period. Firms implementing target-pricing strategies include

28
automobile manufacturers and telecommunications, electricity, and gas service
providers. Perceived value pricing. Many companies base their pricing on perceived
value as identified by the buyer. The price is set to maximize the value that the buyer
assigns to the product based on its utility. The perception of value is a combination of
tangible factors (such as the price of supplementary goods, the usefulness, or utility of
the product) and intangible factors (such as product quality, service, or brand attributes).
This type of pricing strategy is adopted in scenarios where the perceived value of the
product is much higher than its cost. Perceived value pricing is used for a large number
of the brands owned by LVMH Moët Hennessy, the French multinational luxury goods
conglomerate. Brands under its corporate umbrella include F endi, Donna Karan,
Givenchy, Louis Vuitton, Tag Heuer, and Bulgari. Competition-based pricing. In this
form of pricing, prices are decided relevant to those of competitors. Such a method may
well apply to medium-share companies competing against high-share competitors (such
as local hotels competing with international hotel chains) or for products with low
differentiation (such as gasoline). Penetration pricing. This form of pricing strategy, also
known as promotional pricing, involves temporarily setting prices below the market price
or even lower than cost price. This is often used to maximize rapid market entry into
new markets, or the market entry of new products into existing markets. The strategy
was used effectively in the early days of mobile telephony for telecommunications
providers to gain sufficient subscribers to sustain their networks. Dot-com companies
are particularly likely to engage in pricing products below cost, or even giving them
away for free to build a strong customer base. The customer base is then used to
generate income from selling the company or its stocks, or generating revenue from
advertising on the user platform. Skype, Wiley Encyclopedia of Management, edited by
Professor Sir C ary L Cooper. Google, F acebook, and LinkedIn engage in this type of
pricing policies for their prime users. (Their pricing strategies with advertisers would
follow other approaches, such as value-based pricing where the tangible value of
reaching large-scale audience populations is the prime determinant of price.) Skimming
pricing. This type of strategy is used to maximize profits by maintaining the highest price
possible of new products that face a high demand from specific market segments.
Examples would be the high cost of the latest versions of Samsung, Nokia, and Huawei

29
smart phones, which would appeal to a market that is ready to pay a premium for the
most recent technologies.

F AC TO R S IM P AC TIN G PR IC E STR ATEG IES

The choice of pricing strategy adopted by the firm will depend on the overall corporate
strategy, buyer expectations and behavior, competitor strategies, industry changes, and
regulatory boundaries. Other factors affecting the nature of pricing strategies are
mentioned in the following text. Corporate image. The external image of the corporation
affects its ability to adopt a specific pricing strategy. For example, a producer of low-cost
automobiles would find it extremely difficult to move up to an image of a producer of
luxury cars. A mid-market supermarket chain would find it difficult to move up market in
price. The corporation also needs to consider the impact of its pricing strategies on
others, such as shareholders, consumer pressure groups, regulatory authorities, and
government agencies. G eography. Many companies charge different prices for goods
and services in different geographic regions, depending upon local market conditions
and regulations. Discounts. Many corporations offer discounts based on demand for
both volume and value. Large users can usually command significant discounts.
Discounts may also be offered for early payments and penalties imposed for late
payments. Price discrimination. Many companies differentiate between customers,
product or service form, place, and time. Strategic brand architecture creates brands
that are differentiated from the competition, thereby reducing the number of substitutes
in the marketplace. The price elasticity of demand becomes low, allowing the company
to increase prices and improve profitability. Price discrimination is a common practice
where demand varies significantly according to circumstances, as in the case of
spectator sports and seasonal travel. The relatively new practice of charging more for
games between teams with a high following in the Premier League in England and the
Budesliga football clubs has attracted media attention and criticism from sports fans.
The practice of price discrimination has been in place in other industries for several
years, at a higher level of sophistication. Air, rail, and sea travel pricing varies according
to the time of the year and increases when demand is at its highest. Air travel pricing
varies not just with the seasons but also with up to the minute demand levels. Pricing

30
software automatically adjusts pricing on business-to-business and business-to-
consumer sales platforms according to the remaining seat availability and the
fluctuations in the rate of sales of the seats. Price sensitivity. Buyers are less price
sensitive under the following conditions: • Substitute awareness effects, when buyers
are unaware of alternatives. • Difficult comparison effects, when they are unable to
differentiate between product offerings. • Total expenditure effects, when the purchase
use is a low part of discretionary expenditure. • End-benefit effects, when the cost is a
small proportion of the total cost. • Shared cost effects, when costs are shared with
another party. • Sunk investment effects, when costs are related to a cost that has
already been incurred. F UTUR E DIR E C TIO NS F O R PRICIN G STRAT E G Y Pricing
strategy has been affected by changes in the market structure through retail
consolidation, changes in manufacturers’ selling policies, pricing strategy 3 advances in
technology, and the rapid emergence of internet retailing. Retail consolidation. Through
retail consolidation, large-scale retailers have centralized their purchasing function to
reduce the cost of handling intermediaries. For large chains such as McDonalds and
Nordstrom, it is standard practice to buy through a central office. The power in the
supply chain has shifted toward the central buyer and pricing policies set by the
manufacturers are established within these constraints. It is common for the buyer to
dictate the price brackets of the products that they purchase. Manufacturers selling
costs and trade allowances. As a consequence of retail consolidation, manufacturers
are focusing on selling direct to corporate buyers. The cost of selling is reduced when
they deal with larger chain stores and fewer independent retailers. Another change from
the manufacturing side is the reduction of trade promotions. Manufacturers pay as much
as 50% in trade allowances or promotional discounts to stores. The allowances are
intended to give the retailer the option of conducting in-store promotions. Over the
years, fewer benefits have been passed on to the consumers. The disparities in the
manufacturers’ objectives and the retailers’ practices are likely to decrease trade
allowances at source or to lead to regulation. Price optimization modeling. Through
technological advances, more companies are adopting price optimization techniques
through statistical modeling and data mining. Sellers that are more sophisticated are
moving away from rule-based pricing decisions such as markup or seasonal pricing.

31
The mathematical models used to determine optimum pricing are sensitive to changes
in the market and provide decision support for merchandising and revenue
management. Optimization techniques forecast the demand for individual products
based on past pricing, sales revenue, pricing of competing products, shifts in local
geodemographics, levels of inventory, and marketing data. Internet pricing disparity. So
far, online price disparity is as high as offline price disparity. Multichannel retailers (with
online and traditional outlets) have higher prices than e-retailers since they have to
show consistency in pricing across all their channels. By default, the highest price
becomes the default price for all the vendor’s channels. Variations in shipping costs add
another disparity in the final price paid for a product. The growth in online shopping is
leading to a faster availability of price information, resulting in pressure from consumers
for retail prices to converge. Future trends in pricing policies are likely to focus on
information-based optimization through cost reduction of inefficiencies in the supply
chain, the reduction of trade allowances, an increase in responsiveness to changes in
market conditions, greater pricing flexibility, and a reduction of pricing disparity across
different retails channels .

32
 Chapter 4

R esearch in M ethodology

33
 R esearch in M ethodology

Research is a creative and systematic work undertaken to increase the stock of

knowledge, including knowledge of humans, culture, and society, and the use of this
stock of knowledge to devise new applications, or on the other hand Research is a
process of steps used to collect and analyze information to increase our understanding
of a topic or issue.

D ifferent types of S ources of collecting data

W e have learned about what is research, how it is done and the right ethics do it. Now,
is the time to learn about the different sources of collection of data;

Fig 4.1

The above figure show us the different sources of data collection that is, primary data
and secondary data. The process of collecting them is different as shown in Fig.5, but
these data are very important for carrying out the research and completing ones project.
Hence these data are very important for any researcher.34

34
Prim ary D ata

Primary data will be the data that you gather particularly with the end goal of your
research venture. The leverage of Primary data is that it is particularly customized to
your analysis needs. A drawback is that it is costly to get hold of. Primary data is
otherwise called raw information; the information gathered from the first source in a
controlled or uncontrolled situation. C ases of a controlled domain are experimental
studies where certain variables are being controlled by the analyst. The source of
primary data is the populace test from which you gather the information. The initial
phase in the process is deciding your target populace. For instance, if you are looking
into the attractiveness of another washing machine, your target populace may be newly-
[Link] it is impractical to gather information from everybody, so you need to focus
on the sample size and kind of sample. The specimen ought to be arbitrary and a
stratified random sample is frequently sensible. In our washing machine illustration,
subpopulations may incorporate adolescent couples, moderately aged couples, old
couples, and previously wedded couples. Primary data collection involves human touch,
as the researcher has to collect the ideas and ideology of the people he/she is collecting
data from. History as an academic discipline is based on primary sources, as evaluated
by the community of scholars, who report their findings in books, articles, and papers.
Arthur Marwick says " Primary sources are absolutely fundamental to history." Ideally, a
historian will use all available primary sources that were created by the people involved
at the time being studied. In practice, some sources have been destroyed, while others
are not available for research. Perhaps the only eyewitness reports of an event may be
memoirs, autobiographies, or oral interviews that were taken years later. Sometimes the
only evidence relating to an event or person in the distant past was written or copied
decades or centuries later. Manuscripts that are sources for classical texts can be
copies of documents or fragments of copies of documents.35

Secondary D ata

You can break the sources of secondary data into internal as well as external sources.
Inner sources incorporate data that exists and is stored in your organization. External
data refers to the data that is gathered by other individuals or associations from your

35
association’s environment. In scholarship, a secondary source is a document or
recording that relates or discusses information originally presented elsewhere. A
secondary source contrasts with a primary source, which is an original source of the
information being discussed; a primary source can be a person with direct knowledge of
a situation or a document created by such a person. A secondary source is one that
gives information about a primary source. In this source, the original information is
selected, modified and arranged in a suitable format. Secondary sources involve
generalization, analysis, interpretation, or evaluation of the original information.
Secondary source is also very important aspect of collecting data. As primary source
includes manuscripts from ancient time, which is difficult to decipher. Hence, secondary
source helps us to understand that data better through modern languages. For
example, many ancient manuscripts relating to ancient period have been converted into
different languages like Hindi, English, French, Spanish, Sanskrit etc. Hence, secondary
data plays a pivotal role in explaining the research and also collecting data.

Table 4.1

36
 Chapter 5

Analysis and Interpretation of D ata

37
The combination of new and old practices, such as old fashioned habits, new life-cycle
environment, organizational changes, and mounting regulations, has increased the
complexity of the product development efforts. The complexity results from five main
sources: inherent product complexity, process complexity, team cooperation and
communication complexity, computer and network complexity, and a maze of
specifications including international regulations and safety. Over the past several
years, diversities, varieties and complexities of new product introduction (NPI) have
grown from “very simple” to “very complex.” While at the same time, the time to market
aspect has shrunk (Prasad, 1994). The changing market conditions (such as global
manufacturing eonomy, and new innovation), and international competitiveness are
making the time market a fast shrinking target. Today, an automobile – with complexity
several times higher than before – can be manufactured in less time (often less than
three years). The same product, about half a decade ago, used to take over five years
to bring into the marketplace. Whereas, its complexity ten years ago, by today’s
standard, could be characterized only as “very simple.” The workstation market is
another good example. With new innovation in chip technology, workstation companies
have continually shortened the time between new product introductions. In 1985, when
a new central processing (C PU) was introduced, it was quite innovative – but was
nowhere close to today’s standard in complexity. Every 18 months there-
After, a new C PU, twice as complex was introduced at two times the performance at
roughly half the price. In 1988, a four times as complex and four times faster C PU was
introduced at a quarter of the price in a 12-month period. In
1990, the development cycle for a new 16 times faster C PU was introduced in only a six
month time span nearly at 1/16th of its 1985 price. This type of trend goes on for many
other products as well. The average development time for a compact disk (C D) player
today is nine months, a P C is 14 months, and a knowledge-based engineering (software
development) systemranges from two to four years. Among the web of such complexity,
it is easy to overlook that.

38
 Analysis of pricing strategies for new
product
States that one weakness of new product introduction (NPI) is the elapsed time required
to bring the product to market. Many manufacturing companies are losing the
competitive race in this area to the speedy and effective execution process, which other
successful companies (for example, some Japanese electronic manufacturers) use.
Analyzes two sets of companies: those that bring the products to market early; and
those which do so late. Describes the advantages of a com0pany bringing product into
the marketplace before its competitors, and how a company can wrestle away a larger
share of the marketplace. Also provides some closed form algorithms for computing
projected shares of sales volume. Using this formula, a company can compute what
sales volume a company can lock in by introducing a product to market when demand
or need for a product is at its peak. Also provides a computational means for calculating
possible loss of revenues when a company is not able to bring a product timely to the
marketplace. Requirements of the customer are also changing constantly. The
customer is also becoming more
sophisticated. E ach time a company fulfills the customer wants in a product, the level of
customers’ expectation also moves up a notch. They demand customized products
more closely targeted to their personal, social and cultural tastes. The same is true for
the expectations of the performance indicators discussed by Prasad (1996). Products
get old quickly, customers’ excitements fade away, and demands decline. There is a
great danger that a product introduced after few years of its development may not
remain attractive for the market that existed at the launch time.
Strategically, introducing new products at frequent intervals is also not a good business
solution. New products require significant investments in redesign, retooling and
manufacturing costs. Development costs consist mostly of expenditures for employees,
support staff and testing. These costs tend to increase proportionally with the overall
time taken to complete the design. For this reason, most manufacturers have focused
on shortening the time taken for new models to be designed and tested. Toyota,
For example, has set its sights on reducing the average development time of its
automobiles from 30 months to 18 months by this year-end. US Department of Defense

39
(D O D) Computer Aided Acquisition and Logistics Support (C ALS) initiative identifies
concurrent engineering (C E) as an enabling technology that can help potentially lower
development and operational costs while appropriately managing the moving targets.
Pricing your products and services is one of the most daunting yet most crucial parts of
doing business. The goal of strategic pricing is to maximize your profit. It’s a lot more
complicated than raising your prices or increasing your profit margins.

Every business is different. They have different products, different customers and
different market share. It makes sense that there isn’t a one-size-fits-all pricing strategy.
So how do you make the most out of your sales without alienating a potential customer?
And how does your pricing align with the brand identity you want to convey?

Exam ple of C osm etics industry Pricing Strategy

C H ALLEN G ES IN C O SM ETIC PR O D U C T PR ICIN G

Cosmetics are in the lifestyle and brand business, therefore pricing not only determines
the profit you make when considering costs and customer preferences, but the price
can suggest quality or exclusiveness of a cosmetic brand. People respond emotionally
to brands which is why customers are willing to pay a higher price for certain branding
or characteristics regardless of the markup price. Price optimization for cosmetics
brands is an area where Price Beam has long experience and expertise. Consumer
goods companies benefit from price optimization more than any other industry, but at
the same time, it is often an incredibly challenging task. Cosmetic brands are being
increasingly transparent about costs , due to an increase in demand for transparency
from customers in terms of product costs and ingredients, and this leads to a greater
need to find the optimal price for your cosmetic brand products.

40
Fig 5.1

One of the most vexing challenges faced by cosmetic brand firms is setting one price
that unifies all internal objectives: one price that simultaneously boosts top-line growth,
is aligned with the brand positioning, and increases penetration and growth. The selling
format also affects the price setting as well as the purchase decision of customers, in
online stores price is always lower than in the physical store. W e must find a balance
point between the relationship between e-commerce market and physical store pricing.
Our pricing solution addresses this challenge by using data and statistics to find a price
that does just that. And it works every time. Price Beam has worked with companies
from a broad range of industries, and we apply the best practices from all industries
when we help cosmetic firms optimize their pricing. In that way, we continuously
improve and innovate our current pricing method, making sure it stays ahead of the
game and is adjusted to prevailing industry trends.

 Price Positioning & Strategy 

 New Product Pricing

41
  Market Launch Pricing
 Assortment Optimization 
 Value Communication 
 Price Increase Implementation 
 International Pricing
 Promotional Optimization 

PR IC E PO S ITIO N IN G & STR ATEG Y

Setting the overall price position against other products in the assortment, or against
competitors, is always a key challenge in cosmetics.

Fig 5.2
If you need to price a product (or service) in a new market, it makes all the difference in
the world if you understand customers' willingness-to-pay.

42
Demand curves like the ones above, show the optimal price point where the curve
peaks. In this example, the best price to optimize quantity is 10, whereas the optimal
price for optimizing revenue is 15.

In the old days when research was expensive, this could be difficult to get through a
corporate approval if launching in many markets at once. These days, with cost-
effective research options from e.g. Price Beam, the cost of getting these crucial insights
should no longer be an issue.

B R AN D H E ALTH & PR IC IN G

The price is important across the entire Marketing Mix, including the promotion and
branding of a product or service.

Fig 5.3
The price sends numerous messages to the customer, all of which is important to how
she views the brand, such as the level of quality, the social recognition that comes with

43
owning the product, and the value she will get. Therefore, it is important that the price
not only generates short-term profits, but also benefits the long-term brand perception
by being aligned with the positioning of the product or service.

Setting a price that supports your positioning is both a function of your competitors’
prices and the willingness to pay for your product or service. When customers compare
your product to alternatives, they don’t compare it to all products on the market, but to
products that they view as being of similar value. This value is the benchmark that you
use to set a higher or lower price, depending on your brand positioning.

S EG M EN T TH E CU STO M ER S

Understanding different customer segments’ willingness-to-pay is one of the most

powerful tools for increased revenue and profit. After all, different customers have
different levels of willingness-to-pay .

Fig 5.4

44
Market research can be done on the overall market but it is preferable to do brand
health research by customer segment. This provides insights into what customer
segments are value buyers and what customer segments are price buyers. Or what
other customer segments emphasize when choosing among product features and
benefits.

N EW PR O D UC T PR IC IN G
Understand consumers' willingness-to-pay for new products, and use such insights to
optimize prices when launching innovative products.

Fig 5.5

In cosmetics, innovation is crucial for many brands. It is quite common that 20-30% of
all products sold are recently launched. Companies spend many millions in launch
marketing and advertising across multiple channels. However, they often struggle to set
the right price. With Price Beam's price research, you can test different concepts and
communication strategies before launching, and understand consumers' willingness-to-

45
pay for those options. This provides solid facts and improves the likelihood of success
of the launch, when launch prices are aligned with value perception of the consumers.

M AR K ET LAU N CH PR IC IN G

Setting the right prices when launching into new markets is often a challenge in
cosmetics companies. Price Beam helps understanding market differences and setting
optimal price points for each.

M AR K ET LAU N CH CH ALLEN G ES

Pricing Managers, Marketing Managers, and Sales teams often find it more difficult to
get pricing right when launching a product in a new market, as opposed to pricing the
same product in an existing market. In theory existing-market pricing should go through
the same steps as new-market pricing and look at value drivers and willingness-to-pay,
but in many situations existing markets mean there is a reference point to base the price
on. Such a reference point is lacking if pricing for a new market.

VALU E C O M M UN IC ATIO N

Understand the benefits and features that consumers value as well as those attributes that don't
impact consumers' willingness-to-pay

While overall willingness-to-pay is a useful start, for really professional new market
pricing, the next step should be to break down the willingness-to-pay into the individual
value drivers. For what features or benefits are customers willing to-pay, and how much.

46
A good method for understanding the individual value-drivers is to use choice-based
conjoint analysis. In this type of research (see e.g. Price Beam's solution), respondents
are shown a set of product choices. He/she then chooses his preference and is shown a
new set of choices with other configurations; and again; and again. Through the choices
it is possible to determine how much value the respondent puts on the individual
features. The outcome: a series of value-drivers and the value potential customers put
on them in the new market.

PR IC E IN CR E AS E IM PLEM EN TATIO N
Prices should not be static. Quite the contrary, it is best practice to adjust prices
upwards regularly, at least in line with competition and inflation, but often also higher
thanks to brand innovations.

Fig 5.6

Quite often overlooked when pricing a market launch is what happens next year. Or the
year after? Make a plan for how prices should evolve over time in the new market. Do
you start high and then gradually lower the price as the product matures or becomes
obsolete? or do you start low and then introduce price increases?

47
The answer should really lie in what the expected willingness-to-pay is over time. In
most businesses and industries, it is likely to be a more solid strategy to start high and
then over time reduce the price is necessary. This is often associated with human
psychology, where it is easier to accept a price reduction than a price increase.
Especially start-ups get this wrong, where they value themselves too low to begin with,
and then struggle to increase prices later. But also big corporations get it wrong from
time to time.

IN TER N ATIO N AL PR IC E M AN AG EM EN T

Prices vary across countries. Understand differences in willingness-to-pay per market

and set prices accordingly.

Fig 5.7

Actually, in most industries there is a marked difference in prices between countries.

This for a good reason: customers are willing to pay a higher price in some markets
than others. So while it can in certain instances be tempting to introduce a single,
global
48
price to simplify IT systems or manage customers who exploit price differences, the
upside and benefit from differentiated pricing around the world is significant. So don't fall
in the trap of harmonizing prices.

Price Beam market research can be run seamlessly in 109 countries around the world,
with results ready and comparable in less than a week. Use our cost-efficient research
to monitor W TP and optimize prices globally.

AS SO R TM EN T O PTIM IZATIO N

Use market research to understand the differences in willingness-to-pay across all items
in an assortment, and optimize both prices and range.

F ig 5 .8
How many products or services in an assortment, and their individual prices, are
challenges faced by many brand managers, product managers, or customer insight
executives. Price Beam's willingness-to-pay research can reveal how customers see the
indivudal items in the assortment, and how they would choose between them.

Solve different pricing challenges:

 Test willingness-to-pay a premium for brand extensions. 

 Determine the ideal number of items in the assortment 

49
  Test price anchoring effects
 Understand willingness-to-pay segments/groups. 

PR O M O TIO N AL O PTIM IZATIO N

Understand consumers ' potential reaction to different promotional mechanisms or
discount levels, and optimize the overall revenue.

Fig 5.9

Discounting and promotions are prevalent in most industries. Running a promotion or

giving a discount can, when done properly, deliver incrmental sale or help gaining
access to new customers. With Price Beam's Willingness-to-pay research you can
quickly research what your customers really are willing to pay for a product or service in
a given market.

50
 Chapter 6

Lim itation of the study

51
Lim itation of the study

 Secondary data was not easily accessible in the internet.

 It was difficult to find the pricing strategies of any particular sector in
the business.
 We cannot find any information from primary data sources.

52
 Chapter 7
Conclusion

53
C onclusion

F armers do not take it easy at harvest time. Nor should firms. In our mind, it is simply an
untenable management strategy to focus on value creation without thinking about how
that value will be captured. The sooner firms recognize this, the sooner they will be on
their way to bringing in a bumper crop.

W e're not saying that pulling the price lever is a cinch. You must know what you are
doing before you even think about pulling that lever. Once pulled, everything can
change. Profits either rise spectacularly or fall in a traumatic, humiliating way. Whether
you succeed or fail, the effect of your " hand" will be very " visible." Clearly, pricing is not
a game for the fainthearted or someone with a trembling hand. But that doesn't mean
you should not try. Risks and difficulty are inherent in any important corporate decision.
They have not stopped managers from making those decisions and pulling the costs
and sales levers in the past. They should not stop managers from facing up to their
responsibility to examine the price lever now.

However, pricing is an unfamiliar subject for most managers. Until recently, pricing was
scarcely taught except as a unit of microeconomics and a subtopic of marketing. For the
longest time, business education everywhere focused primarily on the other three profit
levers. Business students learned that in a competitive market, prices should be set so
that marginal revenue matches marginal costs. They also learned that competing on
price is generally a last resort and probably a bad idea. Unfortunately, neither precept
offers much guidance to pricing managers. For these managers, they need more
actionable pricing knowledge.

Over the past decade, nearly a dozen books have been published on pricing to help
disseminate that knowledge, but most are quite specific, lacking general interests. In
this book, we aim to make pricing knowledge more tangible, concrete, and fun by
showing how innovative pricing strategies have helped leading companies create and
capture value as well as new customers. W e visit restaurants where the customer sets
the price and see a famous rock band that made money by giving away its album for

54
free. W e look at how Google and other high-tech companies have used pricing to
remake whole industries, and at China, where executives have made an art out of
initiating and fighting price wars—in spite of the conventional W estern wisdom that price
wars are risky, stupid, and sometimes even fatal.

From these stories and many others, you will see that companies price their products in
many different ways—through high prices, low prices, even no price—and you will learn
how, why, and when each method works. W e hope that as you read these stories, you
will learn something not just about how to set prices, but about the importance of
thinking about prices. W e believe you will agree with us that the possibilities of pricing
are endless, limited only by the need to retain some value for future harvest and the
bounds of creativity.

Our experience has taught us that pulling the price lever demands courage and
confidence, the kind best built on your knowledge about what pricing can do, how you
can price your goods or services, and how consumers and your competition might react
to your pricing decisions. If this book helps you gain more confidence in pulling the price
lever and perhaps sparks an idea about an innovative way to price your own product or
service, we will have achieved our main objective.

55
C hapter 8

R eferences

56
R eferences

 Joel Dean Associates and professor of business economics at Columbia

University, Harvard Business Review.

 Nagle, T., Hogan, J., Zale, J. (2013). The Strategy and

tacticsof pricing: A guide to growing more profitably (5th ed.).

 Pearson Education Limited.

Smith, T. (2012). Pricing strategy: Setting price levels, managing
price discounts, & establishing price structures. South-
W estern, C engage Learning.

 Wold, D., et al. (2009). NxLevel guide for entrepreneurs (5th

ed.). Utah: NxLeve L Education Association.
Zimbroff, A. (2015).

 Starting a new business: Pre-launch research.

University of Nebraska–Lincoln Extension publication
E C 495. Wikipedia

 Bolton, R. N., Shankar, V., and Montoya, D. Y. (2010) Recent Trends and Emerging
Practices in Retailer Pricing. Retailing in the 21st C entury, 245–259.

 Kotler, P. and Armstrong, G. (2013) Principles of Marketing, Pearson Prentice-Hall.

57