Views on pricing

• Marketers –opportunity to gain competitive advantage

• Economists-set by forces of demand and supply
• Accountants- must cover costs
• Customers- should represent value
Pricing methods
• 1. market based pricing
• consumer value pricing- according to how much the customers value the
product
• Psychological pricing
• Going rate pricing-according to the competitor’s price(in case of price leader)
• 2. cost plus pricing-full cost of product(fixed, variable, direct, indirect)+mark-
up(profit margin)
• mark-up pricing-% mark-up on direct costs but contribution to the fixed costs
and profit.
• Target return pricing- based on ROI
Pricing strategies- they are for long run
• For new products -
• Market skimming –initial high price to skim the revenues layer by
layer from the market. Eg iphone
• Market penetration –initial low price to penetrate the market quickly
and deeply to attract a number of buyers and gain market share.
• For existing products-
• Pre-emptive- pricing at low level to deter competitors from entering
the market
• Price discrimination-time, geography, age,
Pricing tactics- for short run
• Predatory pricing- when a dominant player in the market reduces
prices below cost with an intent to wipe off the competition. Illegal in
several countries
• Price wars-each firm seeks to increase the market share by increasing
price
• Loss leaders- a product advertised/sold below cost to encourage
customers to buy other full priced products along with the loss leader.
• Promotion pricing- cash(who pay cash), trade(for intermediaries),
quantity(for those who buy in large quantities), seasons( for off
seasonal buyers)
Product mix strategies –maximizes the profit
of total product mix
Product mix strategies
Product mix strategies
Product adjustment strategies- adjusting the basic price
according to customer differences and changing situations
Product adjustment strategies-
Examples
• Customer segment pricing- students, researchers , business men,
locals
• Product form- soft pack, bottle
• Place- city, town etc
• Timing- evening, morning, weekends/days, festivals etc
Product adjustment strategies-
Product adjustment strategies-
Product adjustment strategies-
Product adjustment strategies-