PRICING

A Presentation on
Marketing
What is Marketing Mix?
 Marketing Mix is
defined as the
combination of 4 P’s
which is all about
establishing right
product, price, place
and promotion for a
business.
4 P’s Of Marketing
 Product

 Price

 Place

 Promotion
What is Price?
 Price of a product may be seen as the
financial expression of the value of the
product.
 For a consumer, price is the monetary
expression of the value to be enjoyed/
benefits of purchasing the product.
 (perceived) Value= (perceived) Benefits –
(perceived) Costs
Four Views Of Price
 The ECONOMIST View – price is set by the
forces of demand and supply.
 The ACCOUNTANT’S View – price should
cover the costs so that profit can be shown.
 The CUSTOMER’S View – price has to
represent good value.
 The MARKETER’S View – pricing is an
opportunity to gain a competitive advantage.
Importance Of Pricing

 In The Economy:- influences wages, net interest, profit and

allocation of the factors of production. Important regulator in
the economy.

 In The Customer’s Mind:- The general perception is that

higher price denotes better quality and vice versa.

 In The Individual Firm:- Price of a product is a major

determinant of the market demand for it. It affects firm’s
competitive position as well as profit.
Pricing Strategies
 Strategy is a broad plan of action to
accomplish organizational goals.
 Pricing strategies depend on factors like
1. Corporate goals and objectives.
2. Customer characteristic.
3. Intensity of inter firm rivalry.
4. Phase of the product life cycle.
Various Pricing Strategies

 Market Entry Strategies

 Discounts and Allowances

 Geographic Pricing Strategies

Market Entry Strategies
 Market Skimming Pricing – A very high price is
fixed at the initial stage. As competitors enter the
field, the prices are allowed to fall gradually. Eg.
Nokia 1110i, LCD TVs
 Market Penetration Pricing – A relatively low price
is fixed at the initial stage. The primary aim is to
penetrate the mass market immediately. Eg. Ajanta
toothpaste introducing price for 50g pack at Rs 8
only.
Discounts and Allowances
 Quantity Discounts

 Trade Discounts

 Cash Discounts

 Rebate – Coupon, Mail-in-rebate

 Seasonal Discount
Geographic Pricing Strategies
 Point of Production Pricing or Free on Board
Pricing
 Uniform Delivered Pricing
 Zone Delivered Pricing
 Freight Absorption Pricing
 Home Delivered Pricing
Steps to Determine Pricing
Strategy

 Setting the price

 Selecting the pricing objective
 Determining the demand
 Estimating the cost
 Understanding external factors
 Selecting the pricing method
 Setting the final price
Setting The Price
PRICE

HIGH MEDIUM LOW

Q
U HIGH Premium High Value Super Value
A Strategy Strategy Strategy
L
I MEDIUM Over Medium Value Good Value
T Charging Strategy Strategy
Y Strategy
LOW Rip Off False Economy
Strategy Economy Strategy
Strategy
Selecting The Pricing Objective
 To increase sales volume
 To increase market share
 To earn target profit
 To stabilize price
 To meet or prevent competition
 To Increase
Sales Volume

To Meet Or
Prevent
To Increase
Competition
Market Share
PRICING
OBJECTIVES

To Stabilize To Earn
Price Target Profit
Determining the Demand
Determination of demand is done by determining the
price through the following methods:-
 Optimal feature Pricing
 Penetration Pricing
 Captive product Pricing
 Two part Pricing
 Product bundling Pricing
 Price Skimming
 Differential Pricing
 Promotional Pricing
Estimating the Cost
Irrespective of the type and level of
production there are primarily two
types of cost incurred:
1. Variable Cost
2. Fixed Cost
It is important that price should be set
keeping in mind both these costs.
Understanding the External
Environment
Selecting The Pricing Method
 Cost plus Pricing
 Target Return Pricing
 Value Based Pricing
 Markup Pricing
 Going Rate Pricing
Setting the Final Price