Unit-IV Lecture-16

Developing Pricing Strategies and Programs

A: Understanding Pricing
B: Setting price
C: Adapting the price
D: Initiating and responding to price changes
 Learning Outcome
Students will be able
• to set the price of products and service
Developing Pricing Strategies and Programs
What is Price
A-Understanding Pricing

i-Pricing in a digital world

Buyers can:
-Get instant price comparisons .
-Check prices at the point of purchase
-Get products free
Sellers can:
-Monitor customer behavior and tailor offers.
-Give certain customers access to special prices

Both buyers and sellers can negotiate prices in online

auctions and exchanges or even in person.
A-Understanding Pricing
ii- Changing Pricing Environment

Sharing economy

Bartering

Renting

iii-How companies price

Small companies: boss
Large companies: division/product line
managers
A-Understanding Pricing
iv-How companies should price
Understanding of consumer pricing psychology
a systematic approach to setting, adapting, and
changing prices
iv-Consumer Psychology and Pricing
CONSUMER PSYCHOLOGY
what, when, how customers determine the value of a
service and what convinces a reluctant consumer to try a
new product for the first time.
PRICING: is the process of determining what a company
will receive in exchange for its products.
A-Understanding Pricing
iv-Consumer Psychology and Pricing

Reference prices-“Fair Price” (what consumers

feel the product should cost) Typical Price Last Price
Paid

Price-quality inferences

Price endings
B-Setting the Price
B-Setting the Price
Step 1: Selecting the Pricing Objective
B-Setting the Price
Step 2: Determining Demand
B-Setting the Price
Step 3: Estimating Costs
B-Setting the Price
Step 4—Analyzing Competitors’ Costs, Prices
and Offers
B-Setting the Price
Step 5: Selecting a Pricing Method
B-Setting the Price

• Markup pricing
– Add a standard markup to the product’s cost
B-Setting the Price

• Target-return pricing
– Price that yields its target rate of return on
investment
B-Setting the Price
Break-Even for Target-Return Price
B-Setting the Price

• Perceived-value pricing
– Based on buyer’s image of product, channel
deliverables, warranty quality, customer
support, and softer attributes (e.g., reputation)
B-Setting the Price

• Value pricing- to win

loyal customers by
charging a fairly low
price for a high-quality
offering.
• EDLP
– High-low pricing
• Going-rate pricing
• Auction-type pricing
B-Setting the Price
• Step 6: Selecting the Final Price
C: Adapting the Price
C: Adapting the Price
1-Geographical Pricing
C: Adapting the Price
2-Price Discounts and Allowances
C: Adapting the Price
3-Promotional Pricing
C: Adapting the Price
4-Differentiated Pricing
D: Initiating and Responding to Price Changes
 Mcq’s
•1) When a company introduces a product at a
high price and then gradually drops the price over
time, it is pursuing a ________ strategy.
•A) market-penetration pricing
•B) market-skimming pricing
•C) value-pricing
•D) switching cost
 Mcq’s
•2) If demand hardly changes with a small change
in price, the demand is said to be ________.
•A) strained
•B) marginal
•C) inelastic
•D) flexible
 Mcq’s
•4) A retailer who utilizes a(n) ________ policy
charges a constant low price with little or no price
promotions and special sales.
•A) everyday low pricing
•B) high-low pricing
•C) low cost
•D) going-rate pricing
 Mcq’s
•5) When a company maintains its price but
removes or prices separately one or more
elements that were part of the former offer, such
as free delivery or installation, it is known as
________.
•A) escalating
•B) differentiation
•C) unbundling
•D) reverse discounting