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Pricing 1

The document discusses various pricing strategies and concepts for developing pricing approaches. It covers value-based and cost-based pricing, as well as factors to consider in pricing decisions. The document also outlines different pricing objectives, methods for determining demand and estimating costs, analyzing competitors, and selecting the final price.

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Aswa Ali
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21 views

Pricing 1

The document discusses various pricing strategies and concepts for developing pricing approaches. It covers value-based and cost-based pricing, as well as factors to consider in pricing decisions. The document also outlines different pricing objectives, methods for determining demand and estimating costs, analyzing competitors, and selecting the final price.

Uploaded by

Aswa Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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“DEVELOPING PRICING

STRATEGIES”
AND PROGRAMS
PRICING
‘The amount of money charged for a product or service, or the
sum of the values that customers exchange for the benefits of
having or using the product/service.’

• Value-based pricing Fixed cost (costs that do


not vary with production)
• Cost-based pricing Total cost
Variable cost (costs that vary
directly with level of production)
PRICING

Pricing decisions are complex and difficult. Holistic marketers must take into account many factors in
making pricing decisions _ the company, the customers, the competition, the marketing environment.

Pricing decision must be consistent with the firm’s marketing strategy and its target markets and
brand positioning.
A Changing Pricing Environment
• Get instant price comparison among vendors
• Name the price and have it met
• Get products free
• Negotiate
• Monitor customer behavior and tailor offers
How companies Price ?
• Pricing Department
• Product line Manager
• Small business owners
Consumer Psychology and Pricing

• Reference pricing • Price Ending


Comparing an observed price to an Sellers believe prices should end in an odd
internal reference price they number. Customers tend to process price
remember or an external frame of ‘left-to-right. If a company wants high-
reference such as posted ‘regular price image, avoid odd-ending tactic.
retail price’ E.g.: Rs 289,

• Price-Quality Inferences
Consumers use price as an indicator
of quality.
SETTING THE PRICE
• 1. Selecting the pricing objectives
• 2.Determining Demand
• 3. Estimate Cost
• 4. Analyze Competitors Cost , Price and Offers
• 5. Selecting a price method
• 6. Selecting Final Price
PRICING OBJECTIVES

• Survival
• Maximum current profit
• Maximum market share
• Maximum market skimming
• Product-quality leadership
• 2.DETERMINE DEMAND
• Price sensitivity
• Demand Estimation
• Price Elasticity of demand
3.ESTIMATE COST
• Overall production cost
• Average cost
• Market research
• Design engineer
SETTING PRICING
• 4. Analyze competitors Price and offers
• Cost , price , reaction
5. Select the model
• Value pricing (Everyday low pricing , high-low pricing)
• Perceived Value Pricing
• Going rating pricing ( Based on competitors)
• Auction type pricing
• Target return
• Mark ups
SETTING PRICING
• 6. SELECTING FINAL PRICE
 Impact of other marketing activities
Company pricing policies
Gain and Risk
Impact of price on other parties
PRICING STRATEGIES

1. New product pricing strategies

2. Product mix pricing strategies

3. Price-adjustment strategies
NEW PRODUCT PRICING STRATEGIES

• Market skimming pricing: Setting a high price for a new product to skim
maximum revenues layer by layer from the segments willing to pay the high
price; the company makes fewer but more profitable sales.

• Market-penetration pricing: Setting a low price for a new product in order


to attract a large number of buyers and a large market share.
PRODUCT MIX PRICING STRATEGIES

• Product line pricing: Setting the price steps between various products in a
product line based on cost differences between the products, customer
evaluations of different features, and competitors prices. For example: LUX,
and Dove

• Optional-product pricing: The pricing of optional or accessory products


along with a main product. For example, a car buyer choose to order GPS
navigations system, or booking seat in plane with window.
PRODUCT MIX PRICING STRATEGIES

• Captive-Product pricing: Setting a price for products that must be used


along with a main product, such as bladders for a razor and printer with
cartridges.
• By-product pricing: Setting a price for by-products in order to make the
main product’s price more competitive. For example, meat manufacturer
can sell by-product for dogs/cats.
• Product Bundle pricing: Combining several products and offering the
bundle at a reduced price. Such as McDonald’s family deal.
PRICE ADJUSTMENT ADAPTING
STRATEGIES
• Discount and Allowances Pricing: Discount is a straight reduction in price on
purchases during a stated period of time, like in volume purchases, off
season buying and bill payments. Whereas allowance is promotional money
paid by manufacturers to retailers in return for an agreement to feature the
manufacturer’s products in some way.

• Differentiated /Segmented Pricing: Selling a product/service at two or


more prices, where the difference in prices is not based on differences in
costs. It includes customer-segment pricing, product form pricing, location
pricing, time pricing, image pricing, channel pricing
PRICE ADJUSTMENT ADAPTING
STRATEGIES
• Psychological Pricing: A pricing approach that considers the psychology of prices
and not simply the economics, the price is used to say something about the
product. For example, consumers perceive higher-priced products as having high
quality. It includes reference pricing: price that buyers carry in their minds and
refer to when they look at a given product. And the impact of digits, such as Rs.
1,999 instead of Rs. 2,000.

• Promotional Pricing: Temporarily pricing products below the list price, and
sometimes even below cost, to increase short-run sales.
• Geographical Pricing: Setting prices for customers located in different parts of
the country or world.
INITATING AND RESPONDING TO PRICE CHANGES
• Initiating Price Cuts
• Initiating Price Increases
• Responding to Competitors’ Price changes

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