Pricing Strategy
-
Upload
strongforce10 -
Category
Documents
-
view
17 -
download
1
Transcript of Pricing Strategy
![Page 1: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/1.jpg)
LOGO
Marketing ManagementMarketing Management
Pricing Pricing StrategyStrategy
Minal Agarwal R. No. 3 Aditya Desai – R. No 18
Shaun Fernandes R. No. 23Nidhi Gopalani R. No. 27
Prem Joshi R. No. 29Dharmesh Kharwar R. No. 35
Veenit Kunder R. No. 38Vidhi Mehta R. No. 44
JBIMS MMM-I
![Page 2: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/2.jpg)
Contents
Adapting the price
Selecting pricing objective
Introduction
Inititating and responding to price changes
Steps in Pricing
Determining Demand
Estimating Costs
Analyzing competitors costs, prices and offers
Selecting a pricing method
Selecting the final price
![Page 3: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/3.jpg)
Introduction
Price
It is the monetary value of a product
Pricing Strategy
Pricing
A strategically correct value attached to a product/servic
e corresponding
to what it delivers
![Page 4: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/4.jpg)
Price Quality Segments
Price Quality Segments High
Medium
Low
High 1. Premium Strategy
2. High Value
Strategy
3. Super Value
Strategy
Medium4.
Overcharging Strategy
5. Medium
Value Strategy
6. Good Value
Strategy
Low 7. Rip off Strategy
8. False economy Strategy
9. Economy Strategy
PRICEPRICE
PR
OD
UC
T Q
UA
LIT
YP
RO
DU
CT
QU
AL
ITY
![Page 5: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/5.jpg)
Price Quality Segments
Price Quality Segments High
Medium
Low
High 1. Premium Strategy
2. High Value
Strategy
3. Super Value
Strategy
Medium4.
Overcharging Strategy
5. Medium
Value Strategy
6. Good Value
Strategy
Low 7. Rip off Strategy
8. False economy Strategy
9. Economy Strategy
PRICEPRICE
PR
OD
UC
T Q
UA
LIT
YP
RO
DU
CT
QU
AL
ITY
![Page 6: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/6.jpg)
Price Quality Segments
Price Quality Segments High
Medium
Low
High 1. Premium Strategy
2. High Value
Strategy
3. Super Value
Strategy
Medium4.
Overcharging Strategy
5. Medium
Value Strategy
6. Good Value
Strategy
Low 7. Rip off Strategy
8. False economy Strategy
9. Economy Strategy
PRICEPRICE
PR
OD
UC
T Q
UA
LIT
YP
RO
DU
CT
QU
AL
ITY
![Page 7: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/7.jpg)
Price Quality Segments
Price Quality Segments High
Medium
Low
High 1. Premium Strategy
2. High Value
Strategy
3. Super Value
Strategy
Medium4.
Overcharging Strategy
5. Medium
Value Strategy
6. Good Value
Strategy
Low 7. Rip off Strategy
8. False economy Strategy
9. Economy Strategy
PRICEPRICE
PR
OD
UC
T Q
UA
LIT
YP
RO
DU
CT
QU
AL
ITY
![Page 8: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/8.jpg)
Price Quality Segments
VALUE RECIVEDVALUE RECIVED
PR
ICE
PA
IDP
RIC
E P
AID
Price = ValuePrice = Value
Missed OpportunityMissed Opportunity
Unharvested ValueUnharvested Value
LowLow MediumMedium HighHigh
LowLow
MediumMedium
HighHigh
![Page 9: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/9.jpg)
Step 1
Pricing Objectives
![Page 10: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/10.jpg)
Profit Maximization
Market Share Maximization
Maximize Quantity
Selecting Pricing
Objectives
Status Quo
Survival
Quality Leadership
Partial Cost Recovery
Pricing ObjectivesPricing Objectives
![Page 11: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/11.jpg)
Step 2
Determining Demand
![Page 12: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/12.jpg)
Price elasticity of demand
10095
Quantity Demanded
Pri
ce i
n R
s.
10050
Quantity Demanded
Pri
ce i
n R
s.
5
10
5
10
Inelastic Demanded Elastic Demanded
![Page 13: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/13.jpg)
Step 3
Estimating Cost
![Page 14: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/14.jpg)
Company Logo
Types of CostsTypes of CostsTypes of CostsTypes of Costs
FixedFixed
VariablVariablee
TotalTotal
AverageAverage
Estimating Cost
![Page 15: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/15.jpg)
Cost Per Unit at Different Levels of Production
![Page 16: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/16.jpg)
Accumulated Production
Experience curve (Learning curve)Experience curve (Learning curve)
![Page 17: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/17.jpg)
Target Costing
Starts with ‘The Right’ selling price
Reversal of the usual process
Selling price – desired profit = Target Cost
Evaluation of all costs
Profit achieved through cost cutting
![Page 18: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/18.jpg)
Step 4
Analyzing Competitors’ Costs, Prices, and Offers
![Page 19: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/19.jpg)
Analyzing Competitors’ Costs, Prices, and Offers
Identify price of nearest competitors
Compare the features and prices of competitors
Make decision to charge more, same or less than competitors
Monitor competitors’ reactions
![Page 20: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/20.jpg)
Step 5
Selecting a Pricing Method
![Page 21: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/21.jpg)
Selecting a Pricing Method
Markup Pricing
Target-Return Pricing
Perceived-Value Pricing
Value Pricing
Going Rate Pricing
Sealed-Bid Pricing
Pricing method
s
![Page 22: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/22.jpg)
Markup Pricing
Elementary method - add standard markup to product cost
Elementary method - add standard markup to product cost
Most popular pricing method
Most popular pricing methode.g. Resellers / Retailerse.g. Resellers / Retailers
![Page 23: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/23.jpg)
Target Return Pricing
Determine the price that would yield its target rate of Return on Investment (ROI)
Determine the price that would yield its target rate of Return on Investment (ROI)Break-even VolumeBreak-even Volume
e.g. MHADAe.g. MHADA
![Page 24: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/24.jpg)
Break-Even Chart for Determining Target-Return Price and Break-Even Volume
Break-even volume = fixed cost / (price – variable cost)
Target-Return Pricing
![Page 25: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/25.jpg)
Perceived-Value Pricing
Use of Marketing Elements – Advtg & Sales
Use of Marketing Elements – Advtg & Sales e.g. Luxury Brandse.g. Luxury Brands
Buyers perception of value – not seller’s cost
Buyers perception of value – not seller’s cost
![Page 26: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/26.jpg)
Value Pricing
Everyday low pricing (EDLP)
Everyday low pricing (EDLP)High-low pricingHigh-low pricing
Low price for a high-quality offering
Low price for a high-quality offering
e.g. Supermarketse.g. Supermarkets
![Page 27: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/27.jpg)
Going Rate Pricing
Based on Competitor’s Pricing
Based on Competitor’s PricingFollow the LeaderFollow the Leader
e.g. Bottled water, Soft Drink, Toothpaste etc.
e.g. Bottled water, Soft Drink, Toothpaste etc.
![Page 28: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/28.jpg)
Sealed Bid Pricing
Pricing based on expectations how competitor’s will price rather than on costs or demand
Pricing based on expectations how competitor’s will price rather than on costs or demande.g. Bids for Government Project
e.g. Bids for Government Project
![Page 29: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/29.jpg)
Step 6
Selecting the Final Price
![Page 30: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/30.jpg)
Selecting the Final Price
Selecting Selecting the Final the Final
PricePrice
AA
DD
BB
CC
EEIMPACT OF PRICE ON
OTHER PARTIES
PSYCHOLOGICAL PRICING
GAIN & RISK SHARING PRICING
COMPANY PRICING POLICY
INFLUENCE OF OTHER
MARKETING MIX ELEMENTS
![Page 31: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/31.jpg)
Adapting the Price
![Page 32: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/32.jpg)
OffsetOffset
Buyback arrangement
Compensation Deal
Barter
Counter-trade
Geographical Pricing
![Page 33: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/33.jpg)
AllowanceAllowance
5.5.
Seasonal Discount
Seasonal Discount
4.4.
Functional
Discount
Functional
Discount
3.3.
Quantity Discount
Quantity Discount
2.2.
Price Discounts and Allowances
1.
Cash Discount
Cash Discount
![Page 34: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/34.jpg)
Promotional Pricing
Promotional
Pricing
Loss-leader pricingLoss-leader pricing
Special-event pricingSpecial-event pricing
Cash rebates
Cash rebates
Low-interest financingLow-interest financing
Longer payment termsLonger payment terms
Warranties and service contracts
Warranties and service contracts
Psychological discountingPsychological discounting
![Page 35: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/35.jpg)
Discriminatory Pricing
Customer-Customer-segmentsegmentpricingpricing
Product-Product-form pricingform pricing Image Image
pricingpricingChannel Channel pricingpricing
First-degree price discrimination
Third-degree price discriminationAs in the following cases:
Second-degree price discrimination
TimeTimepricingpricing
Location Location pricingpricing
![Page 36: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/36.jpg)
Discriminatory Pricing (continued…)
Competitors - not undersell firm
Cost of segmenting and policing
Not breed customer resentment
No resell of product
For price discrimination to work, certain conditions must exist:
Not be illegal
Segmentable & different intensities of demand
![Page 37: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/37.jpg)
Product-LinePricing
Product-LinePricing
Product-mix Pricing
(six situations involving product-mix pricing)
(six situations involving product-mix pricing)
Optional-FeaturePricing
Optional-FeaturePricing
Main product + Optional products, Features, Services
Main product + Optional products, Features, Services
Captive-ProductPricing
Captive-ProductPricing
Product + Ancillary / Captive, products
Product + Ancillary / Captive, products
![Page 38: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/38.jpg)
Product-Bundling Pricing
Product-Bundling Pricing
Pure bundling & Mixed bundling
Pure bundling & Mixed bundling
Product-mix Pricing (continued…)
Two-PartPricing
Two-PartPricing
Fixed fee + Variable usage fee
Fixed fee + Variable usage fee
By-ProductPricing
By-ProductPricing
![Page 39: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/39.jpg)
Initiating and Responding to Price
Changes
![Page 40: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/40.jpg)
Circumstances leading to Price cuts
Initiating Price Cuts
AA
Aggressive PricingCC
DD
EE
Excess plant capacity
Economic recession
Drive to dominate the market through lower costs
BBDeclining market share
![Page 41: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/41.jpg)
Initiating Price Cuts
1
Low quality trap: Consumers will assume quality is low
2Fragile- market-share trap: Initial gains to market share but no loyalty
3Shallow-pockets trap: Higher priced competitors cut price and stay longer
Traps due to price cutting
![Page 42: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/42.jpg)
Initiating Price Increases
Over-Over-demanddemand
BB
EE
CC
DD
AACost inflation & Anticipatory Pricing
Delayed Quotation Pricing
Escalator Clauses
Reduction of Discounts
Unbundling
![Page 43: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/43.jpg)
Initiating Price Changes
Possible responses to higher costs or overhead without raising prices include:
Shrinking the amount of product instead of raising the price
Substituting less expensive materials or ingredients Reducing or removing product features Removing or reducing product services, such as
installation or free delivery Using less expensive packaging material or larger
package sizes Reducing the number of sizes and models offered Creating new economy brands
![Page 44: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/44.jpg)
Reactions to price changes
▼
Customers’
Reactions
▼
Competitor’s
Reactions
![Page 45: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/45.jpg)
Responding to competitors’ price changes
If competitors lower price for homogenous products
Try augmentin
g the product
If it doesn’t
work or if it is not likely to
work, then meet the price cut head-on
![Page 46: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/46.jpg)
Responding to Competitors’ Price Changes
In a non-Homogeneous MarketIn a non-Homogeneous MarketIn a non-Homogeneous MarketIn a non-Homogeneous Market
Evaluate
Why a Why a change?change?
Is Is change change
temporartemporary / y /
PermanenPermanent ?t ?
Effect Effect on Mkt on Mkt Share / Share / ProfitProfit
Response(sResponse(s) from ) from
competitorcompetitorss
If competitors raise priceIf competitors raise priceIn a Homogeneous In a Homogeneous Market, follow if Market, follow if whole market is whole market is likely to followlikely to follow
In a Homogeneous In a Homogeneous Market, follow if Market, follow if whole market is whole market is likely to followlikely to follow
![Page 47: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/47.jpg)
When a Market Leader is Being Attacked on Price
OptionsOptions AvailableAvailable
AA
DD
BB
CC
EELaunch a low-price fighter line
Manage Price
Maintain price and add value
Increase price &improve quality
Reduce Price
![Page 48: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/48.jpg)
Price-Reaction Program for meeting a competitor’s price cut
![Page 49: Pricing Strategy](https://reader033.fdocuments.us/reader033/viewer/2022061118/546a3141b4af9f06438b459d/html5/thumbnails/49.jpg)
LOGO
Ref. Marketing by Kotler