MODULE-6

Pricing Strategies
Pricing:
One of the indispensable Ps of marketing
It is the only source that generates revenue to the
organisation
Price presents the value customers place on a
product
Pricing decisions are influences by the channel
decisions also
From the buyers perspective price is the cost that
is weighed against product, quality, delivery &
service
From the sellers view point price is the
profitability of the product.


Factors that influence Pricing Strategy:
1. Customer demand
2. The nature of derived demand
3. Competition
4. Cost & profit relations
5. Marketers reaction & perception of the price
6. Government regulations

1.Customer Demand:
a. Analysing customer benefits:
Functional benefits(design, character)
Operational benefits(reliability & consistency)
Financial benefits(credit terms & cost saving opportunities)
Personal Benefits ( reduced risk, personal satisfaction)
Potential benefits(augmented)
b. Analysing Customer cost
Maintenance
Repair
c. Price Sensitivity
* Varies with purchase over time & circumstances

2.The Nature of derived demand:
The sales to an OEM depends on the level of
customer demand for the product that the
OEM makes
3. Competition:
Existing & potential competition inevitably
affects pricing strategy
It is also known as competitive level-pricing.

Price leadership
If the company increase the & the competitors
dont follow it leads to reduced remand
The following is to be considered:
Total demand will not be reduced by increase in
cost
Other major suppliers will follow the increase
Factors that determine competitors ability to react
to a price reduction:
Costs, time to react, existing commitments, relative
sales volume, Existing operating capacity.
3.Cost & profit relationship:
Competition sets the upper limit of price
Cost sets the lower limit of price
Cost Classification:
Fixed cost
Variable cost
Semi variable cost
Direct cost
Allocated cost
Sunk Cost

4.