P. 1
PRICING STRATEGY

PRICING STRATEGY

|Views: 45|Likes:
Published by Sonraj Tawde

More info:

Published by: Sonraj Tawde on Mar 18, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PPTX, PDF, TXT or read online from Scribd
See more
See less

03/18/2011

pdf

text

original

PRICING STRATEGY

Presenters: Bhaskar K. Bagave (65)  Aniket Ghadge (73)  Vishwas I. Joshi (76)  Chetan More (83)  Sonraj Tawade (93)  Sujay Venkat(96)

.

.

New Product Launch Strategies Pro m o ti n o Hi h g Lo w H i h Rapid Skimming g Slow Skimming Pri ce Lo w Rapid Penetration Slow Penetration .

Pricing Existing Products .

.

.

Factors influencing pricing decisions • Company’s price level sends signal about the quality of its products • Low price may invite price war while high price without sufficient features invite bad publicity • Distribution channels also plays main role in pricing .

 If product is priced higher the judgment of the customer is that the quality of product must be higher. Price. Giffen paradox  Product line pricing  Some companies prefer to extend their product line rather than reduce price  They launch cut price fighter brand to compete with low price rivals. E.  This as an advantage of maintaining image and profits margins of existing brands .g.quality relationship  Consumer use price as an indicator of quality where measurement of quality is not possible.

 Explicability  The company should be able to justify the price it is charging if its on higher side  Company have to send cues to consumers about high quality of product  Competition  Company should be able to anticipate reaction of competitors to its pricing policies and moves  All competitors are not same their approaches and reaction to pricing moves are different  1st level of competitors offer technically similar product  2nd level of competition is dissimilar product serving the same problem in same way rd .

But sometimes some retailers can sell product below list price and manage with lower margins to face competition. list price must reflect the margins required by them. competitive disc. . fast payment disc.        Negotiating margins Here customer expect price reduction Price paid is differ from list price Its known as order-size disc.. Effect on distributors and retailers When products are sold through channels.. Promotional allowance Negotiating margins should be built which allows price to fall but still profitable transaction.

 Political factors  Here price is not having any connection with manufacturing cost . political pressure may act to force down price.  Earning high margins (skimming)  Pioneer are able to charge high price due to lack of alternatives to customers.  Charging low price (penetration)  It may not help company’s cause at initial stage  Because customer associate price with its quality  But if company retain its position for long time than the customers belief about quality price equation will start changing .  Here entry of competitors will force pioneer to reduce its price.

.Health Club Membership.Consumption & Pricing • Consumption of the offering is important to retain customers • Customers feel compelled to use products that they have paid • Consumption is driven by perceived cost rather than actual cost • Example:. software business.

Price Sensitivity • Determine the latitude that company will have in increasing its price  Reasons of Price sensitivity Ø Bearing the cost as opposed to a third party Ø The cost of the item represents a substantial percentage of a customer’s total expenditure .

Reasons of Price sensitivity Ø Able to judge quality without using price as an indicator Ø Easily shop around & assess the relative performance & price of alternatives Ø Take the time he needs to locate & assess alternatives Ø Switch from one supplier to another without incurring additional costs .

INITIATING PRICE CHANGES .

CIRCUMSTANCES UNDER WHICH PRICE CAN BE RAISED • CONSUMER PERCEPTION. • • COMPANIES GO WITH THE FLOW WHEN A COMPANY INITIATES TO RAISE PRICES.HIGHER PRICE HIGHER VALUE. • • EXCESS DEMAND • • PRICE HARVESTING .

CIRCUMSTANCES UNDER WHICH PRICE CAN BE CUT • • • • • • • CONSUMERS STOP BUYING. WHEN COSTS ARE CUT DOWN. INORDER TO INCREASE MARKET SHARE . EXCESS CAPACITY .

PROACTIVE PRICE CUT • PREEMPT COMPETITIVE ENTRY INTO A MARKET.  • WHEN THERE IS NO POTENTIAL IN THE MARKET. .

• SUBSTANTIAL DECREASE IN PRICE TO ATTRACT CUSTOMRES. • INCREASING DU CPRICE BY SMALL AMOUNTS IN STAGES.TACTICS OF PRICE CHANGE • SUBSTANTIAL INCREASE IN PRICE TO RAISE THE VISIBILITY OF PRICE RISE. • REDUCING PRICE WHEN AMOUNT NECESSARY TO STIMULATEBSALES IS UNCLEAR. • . • .

• • DECREASING PRICE WITHOUT DIRECT FALL IN PRICE. . • • INTRODUCING A LOWER PRICE FIGHTER BRAND. • PRICE UNBUNDLING  • MAINTAINING LIST PRICE AND OFFERING DISCOUNTS TO CUSTOMERS.

ESTIMATING COMPETITOR REACTION • A PRICE RISE THAT NO COMPETITOR FOLLOWS. • • A COMPANY’S REACTION TO ANOTHER COMPANY’S PRICE MOVES. .

. EXCESS DEMAND. .     -WHEN BRAND IMAGE IS CONSISTENT.WHEN COMPANIES OBJECTIVE IS TO HOLD OR HARVEST.REACTING TO COMPETITORS PRICE CHANGE • WHEN TO FOLLOW A COMPETITORS PRICE MOVES?  -RISE IN PRICE DUE GENERAL RISING COST. CUSTOMERS ARE PRICE SENSITIVE.

EXCESS SUPPLY BECAUSE THE IT WILL MAKE THE INITITATOR LESS COMPETITIVE.• WHEN TO IGNORE COMPETITORS PRICE MOVES?    -WHEN COSTS ARE STABLE. .

most companies choose to retaliate with price cuts. .Price war • When faced with a competitor who has reduced prices.

Companies have other options without decreasing the price • May reveal its strategic intention to its competitor without responding to price cut • May choose to compete strictly on non price based measures • The company may selectively response to such price cut to avoid the price cut • Company may enter into the competition • .

• Prices should reflect the value that the customer place on the product this will lead to maximization of profit for the company .Best practices • A company should offers three versions of the product for earning higher profits the product placed in the mid range between the high and low end versions usually attracts the maximum sales.

• During new product launch or while entering new market company should experiment with prices to arrive at optimal price. • Bundle pricing can be done to increase profit complementary products or greater volume of the same product can be bundled together .

• . • Price reduction will bring in new customers but will reduce purchase from current customer.• Price swings change demand levels which increases production and distribution cost. • The price structure should reflect the concern of decision maker of buying organization the marketer cannot afford to follow one price policy.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->