Pricing Theories

by

Balaji K

Overview
Dimensions

of Pricing Objectives of Pricing Pricing Mechanism Pricing Techniques Pricing Methods and Problems Transfer Pricing Pricing Policies
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Dimensions of Pricing

Competitive Dimension Time Dimension Geographic Dimension Dimension on the Basis of Business Marketing Mix Product Life Cycle

Objectives of Pricing

Price Stabilisation Maintenance of Market Share Target return on Capital Prevention of Competition(Monopoly Power) Ethical Pricing Policy Good Return for Product Line(Multi Product firm having Common Costs Liquidity(Customers with Prompt Payment)

Pricing Mechanism

Selection of Market Targeted Brand Image Determination of Marketing Mix Selection of Specific Techniques Selection of Pricing Strategy Setting up Specific Price

Framing a Pricing Policy

Seven Main Parties are to be Considered They are 1)Sales Agents 2)Existing Competitors 3)Potential Competitors 4)Consumers of the Product 5)Middlemen 6)Suppliers and 7)Govt

Pricing Techniques
1)Profit Maximisation Rule(MR =MC) or MR > MC 2)Demand related Pricing Technique a)Perceived Value Pricing b)Demand Differential Pricing 3)Cost Related Pricing a)Suggested Retail Pricing b)Incremental Cost Pricing
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Pricing Techniques Contnd.,

3 )c) Target Pricing d) Cost Plus Pricing 4)Competition Oriented Pricing a)Pricing in Competitive Vs Monopoly environment b)Pricing in Established Markets c)Going Rate Pricing d)Sealed Bid Pricing
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Pricing Methods
1)
2)

Skimming Pricing Penetrating Pricing

Problems in Pricing
Transfer Pricing Differentiated Pricing or Price Discrimination Dumping Solution: Antidumping Duty

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Complements (-) vs Substitutes (+)

defined by sign of cross price elasticity
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