PRICING

STRATEGIES AND
PROGRAMS
NILAMADHAB MOHANTY
CIMP
WE WILL DISCUSS…
▪ What are the different pricing strategies and how do they interact with
other components of marketing mix?
▪ Adapting the price
▪ Initiating and responding to the price changes

Pricing strategies and programs 2

 PRICING STRATEGIES AND
1.
POLICIES
Understanding consumer pricing psychology
2. Setting the price
a. Selecting the pricing objective
b. Determining demand
c. Estimating costs
d. Analyzing competitors’ costs, prices, and offers (evaluate from customer perspective,
compare, value, and reaction)
e. Selecting a pricing method
f. Selecting final price
3. Adapting the price
a. Geographical pricing
b. Price discounts and allowances
c. Promotional pricing
d. Discriminatory pricing
e. Product-mix pricing
4. Initiating and responding to price changes
a. Initiating price cuts
b. Initiating price increases

Pricing strategies and policies 3

OBJECTIVE 3: INITIATING
AND RESPONDING TO
PRICE CHANGES

Adapting the price

Initiating and responding to the price changes
ADAPTING THE PRICE

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ADAPTING THE PRICE

▪ Developing a pricing structure that reflects variations in geographical

demand and costs, market-segment requirements, purchase timing, order
levels, delivery frequency, guarantees, service contracts, and other
factors

▪ Geographical pricing
▪ Price discounts and allowances
▪ Promotional pricing
▪ Discriminatory pricing
▪ Product-mix pricing

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ADAPTING THE PRICE
GEOGRAPHICAL PRICING (CASH,
COUNTERTRADE, BARTER)
▪ How to price its products to different customers in different locations
and countries.
▪ Higher prices to distant customers to cover the higher shipping costs, or a
lower price to win additional business?
▪ How should it account for exchange rates and the strength of different
currencies?
▪ Another question is how to get paid.
▪ Countertrade : offer other items in payment
▪ Barter : directly exchange goods, with no money and no third party involved

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ADAPTING THE PRICE
PRICE DISCOUNTS AND
ALLOWANCES
▪Discount
▪ A price reduction to buyers who pay bills promptly
▪ “2/10, net 30,” = trade credit in which clients can opt to either receive a 2 percent discount
for payment to a vendor within 10 days or pay the full amount (net) of their accounts
payable in 30 days
▪ Quantity Discount
▪ A price reduction to those who buy large volumes
▪ “Rs100/- per unit for fewer than 100 units; Rs 90/- per unit for 100 or more units.”

▪ Functional Discount/ trade discount

▪ To trade channel members if they will perform certain functions, such as selling, storing,
and record keeping.
▪ Seasonal Discount
▪ A price reduction to those who buy merchandise or services out of season

▪ Allowance
▪ An extra payment designed to gain reseller participation in special programs

Adapting the price 8

ADAPTING THE PRICE
PROMOTIONAL PRICING
▪ Used to stimulate early purchase
▪ Loss-leader pricing
▪ Drop the price on well known brands to stimulate additional store traffic
▪ Profitable if the revenue on the additional sales compensates for the lower margins on the
loss-leader items
▪ Special event pricing
▪ Special prices in certain seasons

▪ Special customer pricing

▪ Special prices exclusively to certain customers

▪ Cash rebates
▪ Low-interest financing
▪ Longer payment terms
▪ Warranties and service contracts
▪ Psychological discounting
▪ sets an artificially high price and then offers the product at substantial savings;
▪ “Rs359, Rs 299.”

Adapting the price

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ADAPTING THE PRICE
DIFFERENTIATED PRICING
▪ Company sells a product or service at two or more prices that do not reflect a
proportional difference in costs

▪ Customer-segment pricing
▪ Different prices for different groups
▪ E.g. Adobe a software company – student version/ commercial agencies
▪ Product-form pricing
▪ Different versions priced differently
▪ Image pricing
▪ Same product at two different levels
▪ E.g. alternative brands of cosmetics, soaps
▪ Channel pricing (location pricing)
▪ Same product priced differently at different locations
▪ Online vs. physical stores
▪ Time pricing
▪ Same product priced differently at different day, time or season
▪ E.g. BBQ

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INITIATING AND RESPONDING
TO PRICE CHANGES

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INITIATING AND RESPONDING
TO PRICE CHANGES
▪ Initiating price cuts
▪ Excess capacity
▪ Drive to dominate the market

▪ Initiating price increases

▪ Cost inflation
▪ Anticipatory pricing
▪ Overdemand

▪ Reactions to price changes

▪ Customer reactions
▪ Competitor reactions

▪ Responding to competitors’ price changes

▪ Maintain price
▪ Raise perceived quality
▪ Reduce price
▪ Increase price and improve quality
▪ Launch low-price fighter line

Initiating and responding to price changes

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QUESTIONS,
COMMENTS,
CONCERNS?
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