PRICE AS A PART OF MARKETINGMIX

ByBY

SMART LEARNING WAY

INTRODUCTION

• Marketing is the delivery of customer satisfaction at a profit. The twofold goal of marketing is to attract new customer by promising superior value and to keep current customers by delivering satisfaction. Sound marketing is critical to success of any organization-large or small, for-profit or non profit, domestic or global. Large for profit firms such as McDonald's, Sony FedEx, wall-mart and marriott use marketing; but so do nonprofit organization such as colleges, hospitals, museums, symphonies, and even churches.

FLOW OF PRESENTATION

1. Introduction2. Definition of marketing management3. Definition of pricing4. Pricing objectives5. Benefits and price6. Bases of pricing 7. Conclusion8. Review of presentation9. Bibliography

• Even in eastern Europe and other parts of the world in which marketing has long had a bad name, dramatic political and social changes have created new opportunities for marketing Business and government leaders in most of these nation are eager to learn everything they can about modern marketing practices. We begin by defining marketing and its core concept, describing the major philosophies of marketing thinking and discussing some of major new challenges that marketers now face.

Definition of marketing management

• ‘’Marketing, more than any other business function, deals with customers. Creating customers value and satisfaction are the heart of modern marketing thinking and practice’’.

• ‘’Marketing is the delivery of customer satisfaction at a profit. The twofold goal of marketing is to attract new customer by promising superior value and to keep current customers by delivering satisfaction’’.

Definition of marketing management

• ‘’Marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others’’.

• ‘’Marketing is the process of planning and executing the conception pricing, promotion and distribution and ideas goods services to create exchange that satisfy individual and organizational goals’’.

Definition of pricing

1.For many product, the buyer is interested not only in the physical entity called the product but also in a host peripheral elements. The buyer is interested in the ‘price’ of the whole ‘package’ consisting of the physical product accessories, after-sales service, replacement parts, trade-in privileges, and technical guidance.

2. Prices sometimes vary by the type of customers. Wholesalers pay a lower price than retailers who in turn pay somewhat less than ultimate consumers. Bulk buyers often get discounts. A buyer is interested in knowing which price he would end up paying: list price, retail price, wholesale price ex- factory price, etc..

3.Price can vary depending on whether it is delivered price or price at the originating point.

4.The buyer would view a price quite differently on when it is to be paid. The amount of credit, the repayment schedule, and the interest rates influence the buyer’s perception of price.

Pricing objectives

• These should be derived form an organization’s overall objectives. These are essentially some tasks to be achieved. Quite often a product has a multiple number of pricing objectives, with some implicit understanding of priorities. Generally they provide guidelines to the operating manager. The probable pricing objectives are to:

1.Earn a certain return on investment in the subsequent period;

2.Achieve a certain amount of market share in the foreseeable;

3.Attain a certain amount of growth in sales;

4.Stabilize the market ,i.e. to restore order in a fluctuating market;

5. Undermine the efforts of new entrants to gain footholds;

6. Prevent competitors from entering into one ‘s territories;

7.Make competitors accept one as the price leader;

8. Avoid government investigation and control;

9. Maintain the loyalty of middlemen and get their sales support;

10. Augment the sale of weak items in the product line;

11. Enhance the image of one’s product and firm;

12.Recover the investment made within a set period of time; and

13. To set the price at a level that will maintain the employment level.

Benefits and price

Throughout this book we have suggested that in any purchase decision the customer is seeking to acquire benefits. A product must bring with it the promise of performing certain tasks of solving identified problems or even of providing specific gratifications. Thus the product is not bought for the particular components or materials that go into its manufacture per se, but rather it is bought for what, as an entity, it can do.

The implication of the benefits concept form a pricing point of view is that the company must first identify the benefits the customer perceives the product to offer and then attempt to ascertain the value that the customer places upon them. The key issue here is that it is the customer perception that is important. It may be for example that two competing companies offer product that are technically identical to all intents and purposes and yet one company can command a premium price. Why should this be?

It may be that additional benefits offered by one company in the way of technical advice or after sales service are perceived to be superior to those offered by another. Or it may just be that the image of that company is seen as superior. Whatever the reason there are many cases of this type of differential advantage that cannot be explained simply in technical or quality terms.

strong brands have always been able to command a price premium designer labels on fashion garments or obvious examples of the impact of brand image. Even in industrial markets the power of the brand can be significant.

Another way to look at this price advantage is to think of the maximum price at which the product could be sold as being the sum of two elements. First there is the commodity price element which is the base price for the generic product this can be determined by supply and demand in the market place. On top of this should be added the premium price differential which reflects the totality of the customer perceives will be acquired through purchase of that product.

The existence of this premium price differential can only be explained in terms of perceived benefits. The task of the pricing decision maker therefore, becomes one of identifying these benefits and placing a customer value upon them.

price obtained Premium pricedifferential commodity price

supply/demand determined

factor costs

it is in reality a ‘bundle’ of benefits and so the first step in this suggested approach to pricing is to ‘unbundle’ the product and identity the individual benefits components that together constitute the totality. the challenge to the pricing decision –maker is to shift the emphasis away from price towards a wider concept of the total cost of ownership.

This idea is based upon the fact that with many product, the customer will incur many costs other than the initial price over the lifetime of the product. Thus in buying a motor car there are significant costs other than the initial price over the lifetime of the product. Thus in buying a motor car there are significant cost beyond the ‘sticker price’ such as running cost, insurance, service and depreciation.

The Korean car manufacturer Daewoo has achieved considerable success in its European marketing campaign by highlighting the true cost of ownership of its model as compared to competitors models, for example.

Bases of pricing

• Need based pricing

• Cost based pricing

• Market- based pricing

Need based pricing

1. Ability to pay

2. Comparative reasonable price

3. Pricing by norm

4. Poorest can afford

1. Ability to pay:

the price may be determined according to the ability of the consumer to pay. This method of pricing is used in the pricing of state health service, some of the schooling service, housing provided by government or public sector companies, etc..

2. Comparative reasonable price:

In some cases, price Is determined by using a comparative and reasonable ‘open market’ price as reference.

3. Pricing by norm:

A norm may be developed. For example food in an institutional cafeteria may be priced on the basis of a paisa per calorie norm.

4. Poorest can afford:

sometimes pricing of an essential commodity or service is done on the basis that the poorest section of the society should be able to afford the product. Rationed sugar or grain and controlled cloth are priced based on such consideration.

Cost based pricing

Cost- based pricing can be done on the basis of full costs or variable cost. Full –cost pricing is simple if costs are known with accuracy and certainty. However, this type of pricing should be used with caution because the demand may not be equal to targeted output. Variable-cost pricing is used in special cases where it is desirable to stimulate demand and generate some contribution towards fixed overheads which are irreducible in the short run.

For example, readymade garments which go out of fashion are often sold at cut prices so as to recover the direct variable costs and may contribute a little to the overheads.

Market based pricing

Any pricing policy which takes demand factors into consideration and seeks to maximize revenues or profits is called market based pricing is fraught with uncertainties of demand estimation and market response, the problem is often divided into small, structured manageable steps, each of which the executive can hope to tackle with judgment. The following steps may be used:

1. Selection of target markets for the product under consideration.

2. Choosing a product image consistent with the product quality and target consumers.

3. Composing a marketing mix to achieve desired image and position.

4. Selecting a broad pricing strategy consistent with above steps.

5. Arriving at a specific price which judgmentally appears to be the profit- maximizing price.

Conclusion

the pricing decision is one of the most important issues to be faced by the marketing Manager. Almost every market is influenced to some extent or another by the relative price of the products that compete in that market

when customer buy products they are making choices based upon their perception of the relative value of competing offers. The maximum price at which a product or service can be sold can be no greater than its perceived value.

• In this chapter we have proposed that price should be related to the value of benefits that our product or service delivers. Techniques such as trade off analysis can be utilized to assist in reaching pricing decisions, particularly in the valuation of benefits.

Review of the presentation

1. Introduction

2. Definition of marketing management

3. Definition of pricing

4. Objectives of pricing

5. Benefits and pricing

6. Bases of pricing

7. Conclusion

Bibliography 1. Principle of marketing Philip kotler Gary Armstrong prentice hall of India private limited, New Delhi2. Marketing management crenifield school of management3. Marketing management cases and concepts nikhilesh Dholakia rakesh Khurana Labdhi Bhandari Abhinandan K JAin Macmillan India limited

4. Product management in India Ramanuj Majumdar prentice hall of India private limited, New Delhi5. Principles of marketing Philip kotler Gary Armstrong prentice hall of India private limited, New Delhi