PRICING

BUNDLE PRICING
● Price bundling is combining several
complementary products or services into a
single comprehensive package for an
all-inclusive reduced price

● Can help increase average revenue per user

(ARPU) and user engagement.

● Bundle pricing is a great way to move products

quickly, sell off less-successful SKUs, and offer
more value to your loyal customers.

● Best known example of bundle pricing is the

Mcdonalds meal.
 DYNAMIC PRICING
Also referred to as surge pricing, demand pricing, or
time-based pricing this strategy sets flexible prices for
products or services based on current market demands.

Prices are adjusted based on various external factors,

including current market demand, the season, supply
changes.

● Peak dynamic pricing-Higher prices are charged

during peak hours
● Segmented dynamic pricing-This strategy offers
different prices for different customers
● Market changes
 PSYCHOLOGICAL PRICING
This strategy utilizes specific techniques to form a psychological or subconscious impact
on consumers.

Companies set prices lower than a whole number or create artificial time constraints

Advantages: It can easily grab the customers attention and lead to increased sales

Disadvantages: It can create long term price expectations and cause customers to feel
like they’re being manipulated.
 PENETRATION PRICING
Maximise market share

Higher sales volume will lead to lower

unit costs and higher long-run profits

Set the lowest price, assuming the market

is price sensitive

Stimulates Market Growth

Netflix subscription prices going up or their

one month of free subscription ending
 LOSS LEADER PRICING
Aggressive pricing strategy

Store prices its goods below cost to

stimulate sales of the other

Aimed towards stimulating other sales of

more profitable goods.

Sell at loss to attract traffic

Gillette generated much more revenue from the

recurring sales of replacement blades
 PREMIUM PRICING
Price a product higher than the market average

Strengthen perceived quality

Establish a luxury brand image

Consulting- The firm charges high rates far

above industry norms but are always fully
booked
 COMPETITION-BASED PRICING

● Setting the price based on prices of similar competitor

products.
● Also called existing market rate or going rate pricing.
● 87% of the shoppers say knowing they got a good deal is
important to them when deciding which brand or
retailers to buy from.
Example:
Tata Harrier vs Jeep compass
Red Label vs Society Tea
 GEOGRAPHICAL PRICING
● Geographical pricing is the practice of adjusting an item's
sale price based on the location of the buyer.

● Most typically, geographical pricing is practiced by

companies in order to reflect the different shipping costs
accrued when transporting goods to different markets.

● Taxes can also be a consideration, even if shipping costs

are not a factor.

Example:

Netflix, Nandini Milk etc.

 COST PLUS PRICING

● A profit is added to the cost of producing the

product; this is the price at which the product
is available in the market.

● Cost-plus pricing, also called markup pricing.

● With cost-plus pricing you first add the direct

material cost, the direct labor cost and
overhead to determine what it costs the
company to offer the product or service.

● Used by retailers who sell Physical Products.

Example: iphone
 PAY AS YOU WISH
In this strategy the buyer determines the price, but
the seller is obligated to accept it.

It can also be used to undercut the competition.

For it to be successful the customer must perceive

it to be of good quality and have high satisfaction
with the transaction.

It help to avoid buyers remorse.

For sellers it removes the challenging and

sometimes costly task of setting the “right” price

Example:
Panera Bakery in US, YouTube video streams,
Museums pricing
SUBSCRIBE AND SAVE
In this pricing the buyer generally receives 5%
to 10% discount on subscribing the product

It allows customers to easily sign up for

scheduled or recurring deliveries of the
products they use or order on regularly.

Subscribers/ Customers typically commit to the

services on a weekly, monthly or annual basis.

Example:
Amazon Subscribe and Save, BB Daily, Grofers
 FREEMIUM PRICING

Freemium is a two-tiered user acquisition model that splits users into either a
free tier or a premium tier depending on whether or not they pay for an
account. Free users have limited access to product features while premium
users gain greater access to features.

Objective: The main goal of using a freemium acquisition model is to

decrease the customer acquisition cost (CAC) for your business.

You can implement this in several ways:

● Feature limitations
● Usage quotas
● Limited support

Examples: Spotify, Hotstar

 NAME YOUR OWN PRICE
Name your own price is a pricing strategy where the sellers let buyers
decide the final price they want to pay for the offering.

The transaction flows in this way :

● Sellers list products with their own threshold prices.

● Once the buyer likes the product, s/he places the initial offer
for the product.

● If the price offered by the customer equals or is greater than

the threshold price, the transaction takes place at the price
quoted.

● If the offer is less than the threshold prices set by all the sellers,
the buyer gets a chance to update his/her offer in subsequent
rounds.
 Example
● Buyer sets the lucrative purchase price.
● Multiple buyer sends the request.

● Buyer with highest offer gets the item.

● The confirmation is received
PERFORMANCE
BASED
PRICING
Performance-based pricing means to
base your fee on the performance of
your work. A pricing strategy in which
the seller is paid based on the
effectiveness of its product or service.

01
It ensures that the seller does
not undercharge the buyer
and also to buyer that he is
not overpaying.
04
Develops "wide-band width"
communication between
buyer and seller it promotes a
true partnership.
ADVANTAGES
02
It manages risk for the brand,
providing, essentially, a
performance guarantee.
05
It encourages a measure of
risk taking and allows time for
exploration.
03
It can be a financial boon to
both the client and the
agency, realizing both cost
savings and an increased ROI
06
It also frees up the agency to
focus on the work instead of
pre-determined project
limitations
 DISADVANTAGES
01
The arrangement really only
works best with larger project
and account relationships
where both parties can manage
the upfront costs involved,
which is more easily mitigated
by larger agencies.
02
Transparency and
communication can be another
drawback, with the
arrangement itself providing a
disincentive for clients to share
good results and for the agency
to report on outcomes
considered less than ideal.
03
It is complicated as with the
actual amount to be paid can
not be determined until after
delivery, and often even after
usage, of the product or
service.
 APPLICATION
GUIDELINES
Broaden the Develop clear measures
negotiation of achievement for each
perspective to objective. Specify
encompass all precisely what
elements of the "performance" means.
situation.

Invest the time Explore a wide Specify a

up-front to range of outcomes mechanism to
define the and consider what adjudicate
objectives of the is controllable by disagreements
project the seller, the over outcome
buyer, and neither. measurement.
 EXAMPLE
Coca-Cola, integrated a pay-for-performance
aspect that allowed their agencies to earn 23%
margins or add a 30% markup to the base fee. That
fee was set, not based on agency labor or
time/material costs, but through an assessment of
previous fees, current value considerations at the
time and established KPI, industry trends and other
factors.

This was launched in 5 markets, expanded to 35

in 2011 and is still evolving today as part of
Coke’s $6 billion global marketing initiatives.
 ETHICAL
CONSTRAINTS
OF PRICING
 HOW ETHICS PLAYS A
ROLE IN PRICING
Pricing a product ethically is a major decision for any business.

To practice ethical pricing, you need to be able to spot the

ethical issues that hinder fair pricing.

An ethical pricing strategy goes beyond simply following the

law. Similarly, not all unethical pricing strategies are fraudulent
or illegal.

Ethical decisions are difficult sometimes because there

isn’t a defined line for morally right and wrong decisions.
 PRICE DISCRIMINATION
Price discrimination is a selling strategy that charges customers different prices for the same product or
service based on what the seller thinks they can get the customer to agree to.

➔ 1st-degree: Charging the maximum price consumers are willing to pay.

➔ 2nd-degree: Charging different prices depending on the quantity or choices of the
consumer also known as indirect price discrimination.
➔ 3rd-degree: Charging different prices depending on a particular market segment, e.g. age
profile, income group, time of use also known as direct price discrimination.
➔ 4th-degree: When prices to consumers are same, but the producer faces different costs.
Also known as reverse price discrimination.
 BID RIGGING
Bid rigging involves promising a commercial contract to one group, even though you make it look like multiple
parties had the opportunity to submit a bid. The fixed players in a market, manipulate the prices according to
their terms and eliminate other competitors.

Example: The Competition Commission of India found three

electrical firms guilty of anti-competitive agreements for bid
rigging of tenders floated by Indian Railways - Western Electric
and Trading Company, Pyramid Electronics and R. Kanwar
Electricals.

The CCI said the three firms “entered into an arrangement to

rig the bid pertaining to tenders of BLDC fans in Northern
Railway, North East Railway, South Central Railway and Bharat
Earth Movers Limited.
 PRICE SKIMMING
Price skimming is a pricing strategy where businesses tend to markup the initial price of the product
to a much higher rate and slowly decrease it as time goes on.

EXAMPLE :

Sony’s PlayStation 3 console – It was initially launched at

a price of $599 since it basically had no competition and
was deemed to sell since their previous console, the
PlayStation 2, was a huge hit. The price of the PS3 was
then lowered every passing year and eventually reached
$299 during the year was discontinued.
 PRICE FIXING
Price fixing is when two entities, usually companies, agree to sell a product at a set price.
They do this to maintain profit margins.

EXAMPLE:
In 2009, Amazon controlled the ebooks market due to
the grand success of the Kindle. Amazon would sell
ebooks at $ 9.99, which was even below what Amazon
paid the publishers for those titles. The publishers
were worried about cheap ebook sales. Later in
January 2010, Apple decides to open bookstores for
ebooks. Publishers were expecting Apple as a
competitor for Amazon & hence agreed for negotiation
of prices. Later in 2015, Apple were forced to pay $ 430
million as per the US Supreme Court ruling
 PREDATORY PRICING
Predatory pricing is the act of setting prices low in an attempt to eliminate the competition.
Predatory pricing violates antitrust law, as it makes markets more vulnerable to a monopoly.

EXAMPLE :

Confederation of All India Traders has repeatedly made

allegations against Flipkart and Amazon for following
unethical and unfair trade practices wherein their deep
pockets enable them to suffer losses and offer products
predatory prices as a measure to wipe out competition.
While the consumers do not realise anything wrong with
huge discounts in the short run, the long-term impact of
predatory pricing can be catastrophic as such
e-commerce giants can exploit prices.
 PRICE SIGNALING

● In Price Signalling, firms communicate a

strategic pricing action to their competitors
indirectly, since communicating directly is
illegal
● Signalling price actions to one’s competitors
can lead to them following the price or cede
the battle.
● A price signal is also a change in the price of
goods or services which indicates that the
supply or demand should be adjusted to
ensure equilibrium.
 PRICE SIGNALLING EXAMPLES IN THE
INDUSTRY

20%

Pepsi V/S Coca-Cola Adidas India Covishield V/S Covaxin

 TEAM MEMBERS
Aayushi Ranawat- 64
Amay Gupta- 70
Harshit Kapoor- 81
Ishita Trivedi- 83
Mriganka Gupta- 91
Pratik Shetty- 98
Rujuta Parab- 104
Saket Roongta- 105
Samiksha
CREDITS: This Gahlot-
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