Pricing policies ……

unit-6
Meaning:
 In
ordinary usage, price is the
quantity of payment or
compensation given by one
party to another in return for
goods or services
Types of pricing strategies…

 Competition-based pricing
 Cost-plus pricing
 Creaming or skimming
 Penetration pricing
 Psychological pricing
Steps in pricing strategies
 Develop marketing strategy - perform marketing analysis,
segmentation, targeting, and positioning.
 Make marketing mix decisions - define the product,
distribution, and promotional tactics.
 Estimate the demand curve - understand how quantity
demanded varies with price.
 Calculate cost - include fixed and variable costs associated
with the product.
 Understand environmental factors - evaluate likely
competitor actions, understand legal constraints, etc.
 Set pricing objectives - for example, profit maximization,
revenue maximization, or price stabilization (status quo).
 Determine pricing - using information collected in the above
steps, select a pricing method, develop the pricing structure,
and define discounts.
Price strategies
 Cost-plus pricing Setting a price by adding a fixed amount or
percentage to the cost of making the product
 Penetration pricing Setting a very low price to gain as many
sales as possible
 Price skimming Setting a high price before other competitors
come into the market
 Predatory pricing Setting a very low price to knock out all the
other competition
 Competitor pricing Setting a price based on competitors prices
 Price discrimination Setting different prices for the same good,
but to different markets e.g. peak and off peak mobile phone
calls
 Psychological pricing Setting a price just below a large number
to make it seem smaller e.g. £9.99 not £10
Factor affecting pricing
strategies….
 Internal Factors - When setting price,
marketers must take into consideration
several factors which are the result of
company decisions and actions. To a large
extent these factors are controllable by the
company and, if necessary, can be altered.
 External Factors - There are a number of
influencing factors which are not controlled by
the company but will impact pricing decisions.