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Pricing strategies

Pricing strategies for products or services encompass three main ways to improve profits. These are that the business owner can cut costs or sell more, or find more profit with a better pricing strategy. When costs are already at their lowest and sales are hard to find, adopting a better pricing strategy is a key option to stay viable.


Merely raising prices is not always the answer. One strategy does not fit all. so adopting a pricing strategy is a learning curve when studying the needs and behaviours of customers and clients. Too many businesses have been lost because they priced themselves out of the marketplace. On the other hand. especially in a poor economy. too many business and sales staff leave "money on the table". .

• considered where cost fluctuations occur time to time.COST BASED PRICING COST PLUS PRICING •Also called „full cost‟ or mark up‟ pricing •The total cost of the product is determined and a certain profit margin over .themegallery. •Used in departmental stores www.

MARGINAL COST PRICING •The selling price is achieved by covering only the variable costs. •Also called break even pricing and target profit pricing. fully or partly recovering the fixed . •In stiff competition.. www.themegallery. it helps to determine how much the price should be lowered.

• person quoting the lower . other things remaining constant. will get reward •Faces less loss •Quotes lower than others www.themegallery.COMPETITOR BASED PRICING SEALED BID PRICING •Each contracting firm discloses it‟s bid in a paper called tender.

.For example : The firm quoting the lowest price would win the contract but the problem is that the price quoted by competitors is not known and “lowest” is a relative term. hence there is no certainty of getting the order of supply. To take on sealed bid pricing a firm must have good capability to predict the expected prices quoted by key rivals and then offer a lower rate.

•There is a separate market in which the buyer does not prefer an open market price but demands that the sellers provide their rates in sealed form. This is one of the most difficult pricing strategies www. commonly known as . •This may be considered as a case of limited monopsony.themegallery.GOING RATE PRICING •Based on what the competitor charges for similar product.

•Create market share.DEMAND ORIENTED PRICING PERCEIVED PURPOSE PRICING •Value set according to the preference of product. . PRICE DISCRIMINATION •Charging different prices to the buyers for same products. meet competition etc.themegallery.

STRATEGY BASED PRICING MARKET SKIMMING •Product introduced in present . At initial stage . it puts very low price specially to attain market share www. •The initial charges are very high. •Technological products MARKET PENETRATION Opposite to price skimming.

Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition. By pricing products with the suggested retail prices supplied by the vendor. Some suppliers have minimum advertised prices but also suggest the retail pricing. CREATORS . the retailer is out of the decision-making process.RETAIL PRICING Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit.

EDLP saves retail stores the effort and expense needed to mark down prices in the store during sale events. and to market these events. and is believed to generate shopper loyalty. CREATORS .Everyday low price strategy Everyday low price ("EDLP") is a pricing strategy promising consumers a low price without the need to wait for sale price events or comparison shop.

It is a type of pricing where a firm charges a high price for an item and later sell it to customers by giving discounts or through clearance sales. CREATORS . usually small and medium sized retail firms.High-Low Pricing High-low pricing is a type of pricing strategy adopted by companies. The basic type of customers for the firms adopting highlow price will not have a clear idea about what a product's price would typically be or must have a strong belief that "discount sales = low price" or they must have strong preference in purchasing the products sold in this type or by this certain firm.

gaining this understanding requires primary research. perceived or estimated. but not exclusively. on the value.Value Pricing Value based pricing. or Value optimized pricing is a business strategy. It sets prices primarily. In many settings. CREATORS . Value-based pricing is predicated upon an understanding of customer value. This may include evaluation of customer operations and interviews with customer personnel. to the customer rather than on the cost of the product or historical prices.

ADMINISTRATIVE PRICING An administered price is in general a price which is either set (fixed) by legal statute or by a standard procedure formulated as an official policy. to subsidize the supplier and protect his income. the administered price may therefore stay the same. the administered price is kept the same or raised.g. instead of being determined directly by supply costs and market demand. Even if supply and demand conditions change. or alternatively the price is kept constant to protect the consumer/purchaser. or it may change in the opposite direction . demand falls. .if e.

However. It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. .EXPORT PRICING Export pricing is the most important factor in for promoting export and facing international trade competition. there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.

.PRICE DISCRIMINATION  Price discrimination is the practice of discriminating among buyers on the basis of the price charged on the same good. WHY PRICE DISCRIMINATION  A seller does price discrimination with an objective to earn maximum revenue.

2 DIVISION OF MARKET Price discrimination is possible only when the whole market can be divided into various segments .the higher is the probability of price discrimination.whereas the product would be identical. The greater the imperfection . 3 DIFFERENT PRICE ELASTICITIES OF DEMAND IN DIFFERENT MARKETS CREATORS .PREREQUISITES TO PRICE DISCRIMINATION 1 MARKET CONTROL Market imperfection and control are the prerequisite to price discrimination.

2. ability. CREATORS . it is convenient for the seller to charge different prices from different customers. When a certain customers charged different on the basis of their age.BASES OF PRICE DISCRIMINATION Price discrimination can be done on the basis of :  PERSONAL 1.  DEMOGRAPHIC 1. When the seller has direct contact with its customers. In this the seller discriminates the price on the basis of personal discrimination. caste which is not available to other people it creates a demographic separation of market.

Sometimes the price discrimination is done on the basis of need . people living in different areas are required to pay different price for the same product. For e.BASES OF PRICE DISCRIMINATION  NEED 1.e.  PAYING CAPACITY 1. lawyer charging different fees according to the complexity of the case.g. CREATORS . Sometimes price discrimination is done on the basis of paying capacity of the consumers.  GEOGRAPHICAL 1. Sometimes price discrimination is done on the basis of geographical area i.

BASES OF PRICE DISCRIMINATION  TIME 1.  PURPOSE OF USE 1. Sometimes price discrimination is done on the basis of the purpose for which the product is being used. banks charge different interest on different type of loans. When a consumer has to pay different price for the same product during different time.g. CREATORS . 2. For e.

DEGREES OF PRICE DISCRIMINATION 1 FIRST DEGREE When the seller is able to charge different prices for different units of the same product from the same consumer. 3 THIRD DEGREE When the seller manages to take away only a small portion of consumer surplus. such a practice is called price discrimination of first degree. CREATORS . 2 SECOND DEGREE when the seller divides consumers on the basis of their paying capacity and consumer surplus.



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