Pricing Policies & Decisions

Pricing based on Marketing

Considerations
Introduction:-
 Pricing is a crucial decision making issue

 Integral part of marketing mix

 Marketing considerations tend to dominate

over other in determining prices of products
or services
Marketing based pricing approaches:

 High-price – Low volume

 Low-price – High volume

 Going-rate pricing: In this method attempts
are made to match the competitors’ price
without considering the demand and cost
factors.

 Sealed-bid pricing: The quoted price depends

on the expectations of how the competitors
are likely to bid for the tender. A price of
goods or a service for which suppliers are
invited to submit bids.
 Geographical pricing: It is the practice of
modifying a basic list price based on the
geographical location of the buyer. It is usually
done in the following ways:
 Uniform Delivery price: Buyers pay the same
price irrespective of the their location.
 FOB pricing: The buyer pays all the charges of
transportation, loading/unloading, etc.
 Zone pricing: Zone-wise segmentations of
customers are made and then principles of FOB
pricing or uniform delivery price or a combination
of both is adopted.
 Discount Pricing: This method is adopted for
buyers who buy in bulk or make prompt
payment or both.
Discounts are offered on the base price and
usually take place in terms of:
 Cash: Cash discounts are allowed by suppliers on
early payments within the stipulated time.
 Quantity: Quantity discounts are the price
reductions generally allowed on bulk purchases
 Seasonal discounts: Seasonal Discounts are
allowed on off-seasoned buying.
 Discriminatory pricing: Price discrimination
exists when sales of identical goods or services
are transacted at different prices by the same
supplier.
Different prices are charged on the basis of:
 Customers: Based on consumer segments.
 Place: Based on different locations.
 Time: Prices are varied by seasons, day or hours.
 Penetration price: Establishing low product
pricing as a method of seeking rapid entry into
a given market.
 Skimming the cream: Setting a high price and
coming down later if necessary. Skimming is a
strategy used to pursue the objective of profit
margin maximization.

 Snob Value pricing: This is to fix a high price in

order to give the product snob value it needs.

 Pre-emptive pricing: A strategy to pre-empt

the competitors from adopting their own
pricing decisions.
 Product Life Cycle pricing: In this method
pricing strategy tends to be different even for
the same product depending on the particular
stage in the life cycle of the product.

 Price Reductions: It includes the following-

 Price cutting
 Price warfare
 Formation of price cartel
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