Group Members

IIBM-17 Kyi Phyu Hlaing

IIBM-21 Yu Ya Khin

IIBM-26 Naw Sin Mya Hpu

IIBM-34 Hsu Pyae Win Lwin

IIBM-44 Khin La Pyae Wun

Contents

● New Product Pricing strategies

● Product Mix Pricing Strategies
● Price Adjustment Strategies
● Price Changes
● Public Policy & Pricing
New Product Pricing Strategies
Pricing Strategies usually change as the product passes through its life cycle.

Two broad strategies are:

1. Market-skimming Pricing
2. Market-penetration pricing
Market-Skimming Pricing
Setting a high price for a new product to skim maximum revenues layer by layer from
the segments willing to pay the high price; the company makes fewer but more
profitable sales.

Eg. Apple, Sony, Tesla,etc.

Market Skimming makes sense only under certain conditions:

● The product’s quality & image must support its higher price, and enough buyers
must want the product at that price.
● The costs of producing a smaller volume cannot be so high that they cancel the
advantage of charging more.
● The competitors should not be able to enter the market easily and undercut the
high price.
Market-Penetration Pricing
Market penetration is used to penetrate the market quickly and deeply to attract a
large number of buyers quickly and win a large market share by setting a low price
initially when it enters the market.

For example- AGIT Global launched the entry-level, 8-foot, blue-and-white Wavestorm
board at Costco for only $99.99
Several conditions must be met for low-price strategy to work:

● The market must be highly price sensitive so that a low price produces more
market growth.
● The production and distribution costs must decrease as sales volume increases.
● The low price must help keep out the competition, and the penetration pricer
must maintain its low-price position.
Product Mix Pricing Strategies

1.Product line Pricing

2.Optional -Product Pricing

3.Captive-Product Pricing

4.By-Product Pricing

5.Product Bundle Pricing

Product Line Pricing
Setting the Price between various products in a product line based on
cost different between the product,customer evaluation of different
features , and competitors’ price.

Eg.. iphone series

Optional-Product Pricing
The pricing of optional or accessory products along with a main product. It’s when a
business sets a base product at lower price and optional product at a higher price to
make up for any losses.

Eg, in airline industry,tickets are priced fairly low but then the airline charge customer
for all other travel needs.
Captive-Product Pricing
Setting a price for products that must be used along with main product,
also called two- part pricing. The price of service is broken into a fixed fee
plus variable usage rate.

Eg. blade for razors and film for film for camera
By-Product Pricing
Setting a price for by- products to help offset the cost of disposing on
them & help make the main product’s price more competitive
.By-products themselves can turn out to be profitable -turning trash
into cash.

Eg, Chicken processors sell feathers to mattress and pillow makers.

Product Bundle Pricing
Combining several products and offering the bundle at a reduced price. The
bundle pricing is popular in retail and it can help build customer loyalty
and boost product sales.

Eg..Hamper basket ,skincare set

Price Adjustment
Strategies
Companies usually
adjust their basic prices
to account for various
customer differences
and changing situations.
Here we examine the
seven price adjustment
strategies,
Discount & Allowance Pricing
Reducing prices to reward customer responses such as volume purchases, paying
early, or promoting the product.
❏ cash discount e.g. %/ date
❏ quantity discount e.g. volume
❏ functional discount or trade discount e.g. selling, storing, record keeping
❏ seasonal discount e.g. out of the season
❏ Allowance e.g. returning an old item when buying a new one (trade-in allowances)
, promotional allowances_ reward dealers for participating in advertising and
sales-supporting programs
Segmented Pricing
Adjusting prices to allow for differences in customers, products or locations

_selling at more than one price even costs are the same
❏ Customer-segment Pricing e.g. buss prices, students pay less
❏ Product-form Pricing e.g. airliner, economy seats/business-class seats
❏ Location-based Pricing e.g. seat prices in theaters, Concert tickets price
❏ Time-based Pricing e.g. resorts/hotels weekday and weekend, seasonal discounts
Psychological Pricing
Pricing that considers the psychology of prices and not simply the economics; the
price is used to say something about the product. e.g. consumers usually perceive
higher-priced products as having higher quality

Reference prices are prices that buyers carry in their minds and refer to when they
look at a given product. The reference price might be formed by noting current prices,
remembering past prices, or assessing the buying situation. Seller can influence or use
these consumers’ reference prices when setting price. e.g. a company could display its
product next to more expensive ones in order to imply that it belongs in the same
Psychological Pricing
Even small differences in price can signal product differences.

Although actual price differences might be small, the impact of such psychological
tactics can be big. Some psychologists even argue that each digit has symbolic and
visual qualities that should be considered in pricing.
Promotional Pricing
Temporarily pricing products below the list price, and sometimes even below cost, to
increase short-run sales.

e.g. actual price is 10$ but sold for 5$ to attract customers in hope that they will also
buy other products

❏ special-event pricing
❏ cash rebates
❏ low-interest financing, longer warranties, free maintenance

Promotional pricing can have adverse effects.

Geographic Pricing
Adjusting prices to account for the geographic location of customers
_setting prices for customers located in different parts of the country or world
❏ FOB-origin Pricing e.g. price will change according to the distance of location
❏ Uniform delivered Pricing is the opposite of FOB pricing
❏ Zone Pricing e.g. company divides customers into zones, 2 or 3 zones, North and
West
❏ Basing-point Pricing e.g. a city as a basing-point
❏ Freight-absorption Pricing e.g. seller absorbs all or part of the actual freight
charges
Dynamic & Online Pricing
Adjusting prices continually to meet the characteristics and needs of individual
customers and situations. e.g. air tickets

Services ranging from retailers, airlines and hotels to sports team change prices on
the fly according to changes in demand, costs or competitor pricing, adjusting
what they charging for specific items on a daily, hourly or even continuous basic.

Surge pricing: a dynamic pricing method where prices are temporarily increased as
a reaction to increased demand and mostly limited supply.
International Pricing
Adjusting prices for international markets.
Companies that market their products internationally must decide what prices to
charge in different countries. In some case, a company can set a uniform worldwide
price.
E.g. Boeing sells its jetliners at about the same price everywhere, whether in the United
States, Europe, or a Third World country. However, most companies adjust their prices
to reflect local market conditions and cost considerations.
Factors: economic conditions, competitive situations, laws and regulations, and
development of the wholesaling and retailing system. Consumer perceptions and
preferences also may vary from country to country.
Price Change
•Initiating price change
•Respond to price change by competitors
Initiating Price Cut
● There are several reasons for the company to cut off its price.
1. Excess capacity
2. Falling demand
● The company may cut prices to boost sales and growth market share.
● The company also do that for dominate the market growth through lower costs

For example, HP reduces its price to increase its share of the PC market in the
developing countries.
Initiating Price Increases
● Factors of price increasing are
1. Cost inflation
2. Over-demand
● When raising prices, the company must avoid being perceived as a price gouger.
● Wherever possible, the company should consider ways to meet higher costs or
demand without raising prices.
● Company might consider more cost- effective ways to produce or distribute its
products.
For example, separately pricing elements that were formerly part of the offer
Reactions to Price Changes
● When a company initiating a price change, it must consider customers’ and
competitors’ reactions.
● A price change can affect how consumers view the brand.
● All competitors may act alike or act differently in the manner perhaps because of
differences in size, markets shares, or policies.
Responding to Competitor Price Change

Will lower price negatively affect

our market share and profits?
Reduce Price
Public Policy and Pricing

● Price competition is a core element of our free-market economy. Many federal,

state, and even local laws govern the rules of fair play and pricing.
● In addition, companies must consider broader societal pricing concerns.
● For example, pharmaceutical firms must balance their development costs and
profit objectives against the sometimes life-and-death needs of prescription drug
consumers.
Pricing within Channel Levels
➔ Price Fixing

Sellers must set prices without talking to competitors. Otherwise, price collusion
is suspected.
➔ Predatory pricing
Selling below cost with the intention of punishing a competitor or gaining higher
long-run profits by putting competitors out of business.

Selling below cost to unload excess inventory is not considered predatory; selling
below cost to drive out competitors is.
 Pricing across Channel Levels
➔ Price discrimination

A selling strategy that charges customers different prices for the same product or
service based on what sellers think they can get the customer to agree to.
➔ Retail price maintenance

Retail (Resale) price maintenance (RPM) occurs if a supplier pressures a business

not to sell products below a certain price.
➔ Deceptive Pricing

Deceptive pricing is a method in which traders use deceptive means such as ‘original’,
‘former’, or ‘regular’ pricing quotes for the bulk of a season to mislead prospects and
customers into thinking that they’re paying less money for products.