B2B INTERNAL ASSESMENT

PRESENTATION ON
PRICING POLICIES AND
STRATEGIES

Submitted to: Submitted by:

Prof.PramodSrivastva Siddharth Kauhsik(15SECE106001)
SOB Shubhangi Singh(18GSOB2010144)
Batch 2
Galgotias University
SOB,Galgotias University
 Price:Definition &Meaning
• Its one the elements of marketing mix.
• The amount of money charged for a product or service.
• It is the financial expression of the value of any
product.
• The sum of all the values that consumers exchange for
the benefits of having or using the product or service.
• Value here means:

(Percieved)Value= (Percieved)Benefits-(Percieved)Cost

• Examples of “price?”
– Tuition, rent, fare, retainer, toll, salary/wage, dues
 PRICING POLICIES AND STRATEGIES

Pricing policy refers how a company sets the prices of its products and services based on costs,
value, demand, and competition.

Pricing Strategy refers to how a company uses pricing to achieve its strategic goals, such
as offering lower prices to increase sales volume or higher prices to decrease backlog.

Despite some degree of difference, pricing policy and strategy tend to overlap, and the different
policies and strategies are not necessarily mutuallyexclusive .
Factors affecting Pricing Policies
1.CompanyObjectives:
This has considerable influence on the pricing decisions of a firm.
Pricing policies and strategies must be in conformity with the firm’s
pricing objectives. For example- if a company desires a targeted rate of
return on capital investment, then the pricing decisions are so made that
the total sales revenue from all products, exceeds the total cost by a
sufficient margin, to provide the desired return on the total capital
investment.
2.CostoftheProduct:
Pricing decisions are based on the cost production. If a product is priced
less than the cost of production, the firm has to suffer the loss. But the
cost of production can be reduced, by co-ordinating the activities of
production properly, the firm can reduce the price accordingly .
3.Demand:
Market demand for a product or service has great impact on
pricing. If there is no demand for the product, the product
cannot be sold at all. If the product enjoys good demand, the
pricing decision can be aimed to utilise this trend.
4.Competition:
There has been a revolutionary change experienced in the
Indian market after the liberalisation and opening up of the
economy. The impact of competition is more pronounced than
in the earlier days. The market is flooded with too many
products, both Indian and foreign. The number, size and
pricing strategy, followed by competitors have a significant
role to play in the pricing decision. If the product cannot be
differentiated with special features, a firm cannot charge a

higher price than that of its competitors .

5.EconomicConditions:
This also affects the pricing decision of a firm. In a depressed economy, business
activities will be considerably less, but in a boom condition, there will be hectic
business activity. Therefore, economic conditions affect the demand for goods and
services. So, in a depressed economy, in order to accelerate business one sells
goods at a lesser price, but in a boom period, goods can be sold at a high price.
Pricing Strategies

market
skimming

contribution
value pricing
pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competitor
pricing pricing
 1.Penetration Pricing
market
skimming

contribution
value pricing
pricing

penetration loss leader

pricing Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competitor
pricing pricing
 Penetration Pricing

• Prices set to ‘penetrate the market’

• ‘Low’ price to secure high volumes
• Typical in mass market products – chocolate bars,
food stuffs, household goods, etc.
• Suitable for products with long anticipated life cycles
• May be useful if launching into a new market
 2.Market Skimming
market
skimming
contribution
value pricing
pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competitor
pricing pricing
 Market Skimming
• High price, Low volumes
• Skim the profit from the market
• Suitable for products that have short life
cycles or which will face competition at
some point in the future (e.g. after a
patent runs out)
• Examples include: Playstation, jewellery,
digital technology, new DVDs,
innovations and First to Market products
etc.
 3.Value Pricing
market
skimming
value
contribution
pricing pricing –
based on
perceived value

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competitor
pricing pricing
 Value Pricing

• Price set in accordance

with customer perceptions
about the value of the
product/service
• Examples include status
products/exclusive
products /art pieces
Companies may be able to set prices according to
perceived value.
 4.Loss Leader
market
skimming

contribution
value pricing
pricing

loss
penetration
pricing
leader –
sold at cost or
Pricing below to attract
Strategies buyers

cost-plus psychological
pricing pricing

predatory competitor
pricing pricing
 Loss Leader

• Goods/services deliberately sold below cost to

encourage sales elsewhere
• Typical in supermarkets, e.g. at Christmas, selling
bottles of gin at R30 in the hope that people will be
attracted to the store and buy other things
• Purchases of other items more than covers ‘loss’ on
item sold
• e.g. ‘Free’ mobile phone when taking on contract
package
5.Psychological Pricing
market
skimming

contribution
value pricing
pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing
pricing e.g R19.99

predatory competitor
pricing pricing
 Psychological Pricing

• Used to play on consumer perceptions

• Classic example - R9.99 instead of R10.99!
• Links with value pricing – high value goods priced
according to what consumers THINK should be the
price
6.Competitor Pricing(Going Rate)

market
skimming

contribution
value pricing
pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competito
pricing
r pricing
 Competitor Pricing (Going Rate)

• In case of a price leader, rivals have difficulty in competing on

price – too high and they lose market share, too low and the
price leader would match price and force smaller rival out of
market
• In this strategy, we are compelled to follow pricing leads of
rivals especially where those rivals have a clear dominance of
market share
• Where competition is limited, ‘going rate’ pricing may be
applicable – banks, petrol, supermarkets, electrical goods –
find very similar prices in all outlets
 7.Predatory Pricing

market
skimming

contribution
value pricing
pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competitor
pricing
pricing
 Destroyer/Predatory Pricing

• Deliberate price cutting or offer of ‘free

gifts/products’ to force rivals (normally smaller
and weaker) out of business or prevent new
entrants
• Flooding the market with cheap (often imported)
goods
• Anti-competitive and illegal if it can be proved
8.Contribution Pricing
market
skimming

contribution value pricing

pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing pricing

predatory competitor
pricing pricing
 Contribution Pricing

• Contribution = Selling Price – Variable (direct costs)

• Prices set to ensure coverage of variable costs and a
‘contribution’ to the fixed costs/overheads
• Similar in principle to cost-plus pricing
• Every product sold gives back a contribution towards
covering the running costs of the business
• Break-even analysis might be useful in such
circumstances
 Cost-Plus Pricing
market
skimming

contribution
value pricing
pricing

penetration
loss leader
pricing
Pricing
Strategies

cost-plus psychological
pricing
pricing

predatory competitor
pricing pricing
 Cost-Plus Pricing

• The cost of the product + mark-up = selling price.

• You can do this by using a fixed percentage (150%,
200%) or a fixed markup (R10, R50, R500)
• The advantage of this method is that you are able to
calculate your expected profit level very easily.
• The disadvantage is that it may be less, or more, than
customers are willing to pay and, most importantly,
some hidden costs may be forgotten and so the actual
profit is less than you think (or even a loss)
THANK YOU