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CASE STUDY

WHAT IS PRICE ?

PRICEThe amount of money charged for a product or

service, or the sum of the values that consumers exchange for the benefits of having or using the

product or service.

PRODUCT MIX PRICING STRATEGIES

Product Line Pricing Optional Product Pricing Captive Product Pricing By Product Pricing Product Bundle Pricing

PRODUCT LINE PRICING• Setting Price Steps Between Product Line Items.• Product line pricing takes into account the cost difference

between products in the line, customer evaluation of their features, and competitors’ prices.

Rs 549

Rs 318

PRODUCT MIX PRICING STRATEGIES

OPTIONAL PRODUCT PRICING Optional product pricing takes into account optional or

accessory products along with the main product.

New car with ordinary rims $59,000New car with sports rims

$60,000

PRODUCT MIX PRICING STRATEGIES

CAPTIVE PRODUCT PRICING Pricing products that must be used with the main product• High margins are often set for supplies

Services: two-part pricing strategy• Fixed fee plus a variable usage rate

PRICE ADJUSTMENT STRATEGIES (Cont’d)

Conditions For Segmented Pricing:

The market must be segmentable

The segments must show different degrees of demand

The cost of segmenting and watching the market cannot exceed the extra revenue obtained from the price difference

The segmented pricing must also be legal

Segmented pricing should reflect real differences in customers’ perceived value

PSYCHOLOGICAL PRICING

REFERENCE PRICESAnother aspect of psychological pricing is reference price –prices that buyers carry in their minds and refer to when they look at a given product.

A price approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product. Many consumer use the price to judge quality.e.g.Consumer usually perceives higher-priced products as having high quality.

 

PRICING CUESConsumers rely on different cues that signal whether a price is high or low. Interestingly, such pricing cues are often provided by the seller.Common pricing cues are as follows:

1. Sale Signs The most straightforward retail pricing cue is a sale sign. It might take any of several familiar forms; “Sale!” “Reduced!” “New low price!” “price after rebate!” or Now 2 for only . . . !”

2. Pricing Ending In 9:Just like a sale sign, a 9 at the end of a price often signals a bargain.

PRICING CUES (Cont’d)3. Sign Post Pricing(Or Loss Leader Pricing)In this technique seller selected sign post items at or below cost to pull customers into the store, hoping to make money on the shopper’s other purchases.

4. Price-matching GuaranteeAnother widely used pricing cue is price-matching. Where by stores promise to meet or beat any competitor’s price

PROMOTIONAL PRICING

Cell phone marketers will take a loss on the

phone to use as a

promotional discount

Marketing in Action

GEOGRAPHICAL PRICINGGeographical Pricing is used for customers in different parts of the country or the world.

FOB Pricing

Uniformed Delivery Pricing

Zone Pricing

Basing Point Pricing

Freight Absorption Pricing

DYNAMIC PRICING (Cont’d)

 DYNAMIC PRICING CAN ALSO BE CONTROVERSIALAmazon.com learned this some years ago when it experimented with lowering prices to new customers and higher prices to its regular customers.

CAUTION AVOIDS SORROWSDynamic pricing makes sense in many contexts. It adjusts prices according to market forces, and it often works to the benefit of the customers. Marketers need to be careful while using dynamic pricing.

PRICE CHANGESAfter developing the price structures and strategies, companies often face situations in which they must initiate price changes or respond to price changes by competitors.

a) Initiating price changesb) Initiating price cutsc) Initiating price increases

A. INITIATING PRICE CHANGESIn some cases, company may find it desirable to initiate either a

price increase. In both cases, it must anticipate possible buyer and competitor reactions.

PRICE CHANGES

RESPONDING TO COMPETITORS’ PRICE CHANGES