Module IV

Pricing

Affordability

Affordability

Income of Customers

Price of the product/Service

Market FragmentationSaturation of marketsInter-category CompetitionCustomizationValue conscious consumption

• Price – Market value of a product or service• Monetary and Non Monetary terms

Concept and Significance

Indicates the market value of a product

Gives an image to the product

Major tool in Marketing in designing offers

Major tool in Marketing in competitive battles

Prices of goods possessed and used by the consumers determine their status

Determine level of demand of the product

Generate sales, revenues and profits for firms

Stay Competitive

Price Decision

Price

Pricing Objectives

Profit Sales

Competition Development

• Profit Maximization• Innovative Product Firms• Limited Period of Protection• Software firms• Traders with perishable goods

• Target Return• Securing maximum sales without sacrificing profitability• Need for liquidity or funds for expansion• Desire to recover the investment early• Mitigating competition• Win-slow instead of make a fast buck• Manufacturing organizations

Profit Objectives1

Challenges

• Growth in absolute sales• Growth in Market share• Depends on two factors

– Growth in Market– Growth in sales of the firm

Sales Objectives2

• Meet or prevent competition• Destroy competition• Price leader “policing” the price• Predatory tactics lead to cut throat

competition

Competition Objectives3

• Expand existing Markets

– Stimulating non users– Encouraging more product use

• Enter into new markets

– Penetration or Skimming?

Development Objectives4

• Systematic approach to pricing• Covers all principal pricing problems• 3 Bases• Cost• Competition• Demand

Pricing Policy

• Cost Plus Mark-up• Marginal Cost or Contribution• Target Return• Pay Back method• Experience Curve

Cost Based Approach1

Competition Based Approach2

Leader Pricing Competitive Pricing

Going rate Pricing Sealed bid Pricing

Demand Based Approach3

Discrimination/ Differential

Perceived Value

Psychological

Value

Rural Pricing

Quality Conscious Value Conscious Price Conscious

Discriminatory

(Product Form, Location and Time)

Perceived value

Psychological

Psychological –Odd Nos

Value Pricing

Skimming vs Penetration

Small Units and Low Pricing

Promotional Pricing

Pricing – Distribution

Based Factory Pricing

Uniform delivered Pricing

Zone Pricing

Base- Point Pricing

Pricing – Promotion Based Cash Rebates

Price-Offs

Low Interest Financing

Longer Payment terms

Warranties and Service Contracts

Loss Leader or Traffic Builder

EDLP

Exchange Price Offer

Membership Cards