Contents

CHAPTER ONE: INTRODUCTION............................................................................................................2

Background of the Study...................................................................................................................2
Objectives of the Study......................................................................................................................2
Scope of the Study:............................................................................................................................3
Limitation of the Study:.....................................................................................................................3
CHAPTER TWO: METHODOLOGY..........................................................................................................4
Research Design................................................................................................................................4
Sources of data:.................................................................................................................................4
CHAPTER THREE: DIFFERENT PRICING STRATEGIES.............................................................................5
Joint Product pricing:.........................................................................................................................5
Incremental Cost...............................................................................................................................5
Fully-distributed cost:........................................................................................................................6
Transfer Pricing..................................................................................................................................6
Price Discrimination...........................................................................................................................7
Types of Price Discrimination............................................................................................................7
First-degree Price Discrimination...................................................................................................7
Second-degree Price Discrimination..............................................................................................7
Third-degree Price Discrimination.................................................................................................7
Product bundle pricing......................................................................................................................8
Peak-load Pricing...............................................................................................................................9
Rigid Pricing.......................................................................................................................................9
Flexible Pricing...................................................................................................................................9
Seasonal Pricing...............................................................................................................................10
Going rate pricing............................................................................................................................10
Charm Pricing..................................................................................................................................10
New Product pricing........................................................................................................................11
Market –skimming pricing...........................................................................................................11
Market Penetration pricing..........................................................................................................11
Conclusion...........................................................................................................................................11
CHAPTER ONE: INTRODUCTION

Background of the Study

Pricing, as the term is used in economics and finance, is the act of establishing a value for a
product or service. In other words, pricing occurs when a business decides how much a
customer must pay for a product or service. Pricing is an important part of the overall
marketing mix. After a price has been established, there are ways to change the base price in
response to short-term needs. There are also times when a company needs to adjust prices for
economic reasons. If a firm does not react to changes in the economy, the end result could be
the dissolution of the company due to decreasing profits and sales. Pricing refers to the
decision-making process that goes into establishing a value for a product or service. There are
many different strategies (like product bundling, peak–load pricing, going rate, special
design, charm pricing etc.) that a business can use when setting prices, but they are all a form
of pricing. The price that's set during the pricing process is what the customer will pay for
that product or service. A pricing strategy is a model or method used to establish the best
price for a product or service. It helps you choose prices to maximize profits and shareholder
value while considering consumer and market demand. Pricing strategies take into account
many of our business factors, like revenue goals, marketing objectives, target audience, brand
positioning, and product attributes. They’re also influenced by external factors like consumer
demand, competitor pricing, and overall market and economic trends. Price Discrimination
involves charging a different price to different groups of consumers to take advantage of
different elasticity of demand. There are different types of price discrimination from first
degree to third degree.

Objectives of the Study

Primary Objective:

 The primary objective in this report is to fulfill the partial requirement in the trimester
Spring-2020 of this course.
Specific objective:

 To get some idea about pricing of multiple products

 To present an overview of different types of pricing strategy
 To achieve overall understanding of pricing strategy in the economy.
 To find which companies, products, or brands follow a specific pricing strategy and
how they can set the price.
 To apply theoretical knowledge about pricing in the practical example of different
companies or products.
 To present Price Discrimination

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Scope of the Study:

This report focuses on different types of pricing strategy in Bangladesh that provided us with
the opportunity to gather practical experiences and knowledge about different pricing strategy
applied by different company or products. We got a primary idea about the different types of
pricing practices in the economy. we had a great opportunity to have in depth knowledge of
pricing that has enriched our knowledge and will help us a lot in future to build up our career
in the job sector.

Limitation of the Study:

To prepare this report, we have faced some limitations, which are mentioned in the follows:

 Time Limitation
The main and the first constraints is time that hinder to cover all aspect of the
study. The given time to finish the term paper it is not sufficient to cover
learning about this topic properly and also going to write a report on this.

 Lack of information
Since we have not made this report on any specific organization, in that case we
have enough lack of information. That’s why it is very difficult to collect from any
other sources.

 Low proficiency in report preparation

Lack of self-knowledge concerning report preparation, was also a limiting factor in
preparing a better report.

 Improper Data
The secondary data that have been observed was in a form, which was less helpful
for this study.

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CHAPTER TWO: METHODOLOGY

Research Design

This report is a descriptive type of research, which briefly reveals the Different types of
pricing strategy in Bangladesh .It has been administered by collecting secondary data.
Different reports, articles and the website of various site were the major secondary data
sources in this regard. The study is performed based on the information extracted from
different sources collected by using a specific methodology. This report is evocative in
nature.

Sources of data:

Primary data:
No primary data was used upon the completion of this report.
Secondary data:
1. Different text books, articles and journals.
2. Some of our text book and course elements as related to this report
3. Website of the different sources.
4. Various reports to study.
5. Web base support from the internet

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CHAPTER THREE: DIFFERENT PRICING STRATEGIES

Joint Product pricing:

If a Company produces two or more products jointly & set one price for a full set is called
joint product pricing.
Example: If a company produces mobile phone it’ll also produce charger of that mobile
phone. Then will set a joint price for them.
Pure it water purifier with Germ kit- There is no way to produce & sell only Pureit, because it
is equipped with gem kit and people need to change the Germkit frequently. Other examples
can be Gelpen with Ink refill
Goodnight mosquito killer with refill pack.

Incremental Cost

Incremental cost is the extra cost that a company incurs if it manufactures an additional
quantity of units. Incremental cost is the total cost incurred due to an additional unit of
product being produced. Incremental cost is calculated by analyzing the additional expenses
involved in the production process, such as raw materials, for one additional unit of
production. Understanding incremental costs can help companies boost production efficiency
and profitability. For example, consider a company that produces 100 units of its main
product and decides that it can fit 10 more units in its production schedule. The additional
cost it will incur for producing these 10 units is the incremental cost.
Incremental cost is sometimes known as marginal cost, but there is a difference between the
two. In marginal cost, you would consider the increased total cost that will arise from the
production of one more unit. When considering incremental cost, you take into account only
the total costs that change from your decision to produce extra units.
These costs can have an effect on the pricing of the product. For instance, if the incremental
costs lead to an increase in the per-unit manufacturing cost of a product, the company may
decide to raise the price to retain its existing return on investment or to make more profit.
However, if the production cost per unit decreases as a result of the incremental costs, the
company may decide to reduce the price of the product price and make a profit by selling
more units.
To understand how incremental cost works, assume your business spends $200,000 on
producing 5,000 glass bottles. That means the cost per glass bottle you incur is $40. You then
decide to increase your output and manufacture 10,000 bottles and spend $250,000 to
produce them. That means you will spend $25 per bottle.
To arrive at the incremental cost, you would subtract $250,000 from $200,000. So, the
incremental cost of manufacturing the additional 5,000 glass bottles will be $50,000. To get
the incremental cost per bottle for the 5,000 additional glass bottles, you would need to divide
$50,000 by 5,000, which come out to $10.

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Fully-distributed cost:

The fully-distributed cost (FDC) method is a top-down costing approach that was the

dominant form of cost measurement over the past several decades. It is still used in many
countries today, primarily due to its simplicity in that costs are apportioned to the services
which incur the cost. The main advantage to using FDC is that the method
uses accounting methods that tend to be more easily verifiable for audit purposes. Secondly,
at least for incumbents, FDC often embeds a contribution to common costs.
FDC assumes that there exist some accounts that can be specifically allocated to a single
service, while other accounts are classified as common or overhead cost to two or more
services. To allocate common costs, input coefficients3 are usually developed
as parameters to be estimated when dividing common costs among groups of shared inputs.

Example:

Transfer Pricing

Transfer price is the price at which transact with each other, such as during the trade of
supplies or labor between departments. Transfer prices are used when individual entities of a
larger multi-entity firm are treated and measured as separately run entities. It is common for
multi-entity corporations to be consolidated on a financial reporting basis; however, they may
report each entity separately for tax purposes.

A transfer price can also be known as a transfer cost.

Transfer pricing is the setting of the price for goods and services sold between controlled
(or related) legal entities within an enterprise. For example, if a subsidiary company sells
goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the
transfer price. Legal entities considered under the control of a single corporation include
branches and companies that are wholly or majority owned ultimately by the parent
corporation. Certain jurisdictions consider entities to be under common control if they share
family members on their boards of directors. Transfer pricing can be used as a profit
allocation method to attribute a multinational corporation's net profit (or loss) before tax to
countries where it does business. Transfer pricing results in the setting of prices among
divisions within an enterprise.

Example of Transfer Pricing

Meghna Group Industries has a product named – no. 1 condensed Milk, and Fresh sugar.
They also have numerous number of own shipping cargos.
So as they are vertically integrated, they use fresh sugar for the production of No 1 condensed
milk. So, sugar is an input for another product of the same company which is referred for
transfer pricing.

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Price Discrimination

Price discrimination is a selling strategy that charges customers different prices for the same
product or service based on what the seller thinks they can get the customer to agree to. In
pure price discrimination, the seller charges each customer the maximum price he or she
will pay. In more common forms of price discrimination, the seller places customers in
groups based on certain attributes and charges each group a different price.

In a competitive market, price discrimination occurs when identical goods and services are
sold at different prices by the same provider. In pure price discrimination, the seller will
charge the buyer the absolute maximum price that he is willing to pay. Companies use price
discrimination in order to make the most revenue possible from every customer. This allows
the producer to capture more of the total surplus by selling to consumers at prices closer to
their maximum willingness to pay.

Example: Star Cineplex has price discrimination strategy as an example seats at front are
cheaper than seats at the back. It is also seen in airlines and other transportation services.
Shyamoli paribahan have different buses like economy class and business class. So that it can
attract customers of different segments.
Types of Price Discrimination

There are three types of price discrimination: first-degree or perfect price discrimination,
second-degree, and third-degree. These degrees of price discrimination are also known as
personalized pricing (1st-degree pricing), product versioning or menu pricing (2nd-degree
pricing), and group pricing (3rd-degree pricing).

First-degree Price Discrimination

First-degree discrimination, or perfect price discrimination, occurs when a business charges
the maximum possible price for each unit consumed. Because prices vary among units, the
firm captures all available consumer surpluses for itself, or the economic surplus. Many
industries involving client services practice first-degree price discrimination, where a
company charges a different price for every good or service sold.

i) Buy 2 and get 50% discount on second one.

ii) VIP/single cabin in launch services.

Second-degree Price Discrimination

Second-degree price discrimination occurs when a company charges a different price for
different quantities consumed, such as quantity discounts on bulk purchases.

i) In cyber cafe, 1hr at 30tk/hour

ii) 2 hour at 25tk/hour
iii) 3 hour at 20tk/hour
Third-degree Price Discrimination
Third-degree price discrimination occurs when a company charges a different price to
different consumer groups. For example, a theater may divide moviegoers into seniors,

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adults, and children, each paying a different price when seeing the same movie. This
discrimination is the most common.

i) Commercial ratio of electricity bill is 18tk/unit but the same electricity for the
households for 5tk/unit because corporate sector is less elastic than household.
ii) Also a vegetable whole seller gives supply of vegetables at a higher rate to
gulshan, banani and dhanmondi area rather in mailbag, khilgaon and puran Dhaka.
Here market segment is based on geography.

Examples of Price Discrimination

Many industries, such as the airline industry, the arts and entertainment industry, and the
pharmaceutical industry, use price discrimination strategies. Examples of price discrimination
include issuing coupons, applying specific discounts (e.g., age discounts), and creating
loyalty programs. One example of price discrimination can be seen in the airline industry.
Consumers buying airline tickets several months in advance typically pay less than
consumers purchasing at the last minute. When demand for a particular flight is high, airlines
raise ticket prices in response.
By contrast, when tickets for a flight are not selling well, the airline reduces the cost of
available tickets to try to generate sales. Because many passengers prefer flying home late on
Sunday, those flights tend to be more expensive than flights leaving early Sunday morning.
Airline passengers typically pay more for additional legroom too.
Product bundle pricing
Product Bundle pricing is the practice of selling a set of items as a package for a price
lower than what the items would cost if sold separately. The concept is to make purchases
easier for consumers by including associated items together, and by giving them one price
that represents some type of discount. For the business, this can be beneficial, leading to
more sales of items. In a small business, it’s a good idea to take a look at bundle pricing
and see whether it can work for that particular business model.

Product Bundle Pricing Example

Examples of bundle pricing range in magnitude from everyday items to large purchase

i) Seylon family blend tea pack- 400 gm price 195tk but in Eid ul Adha they are
offering 2 packet of tea (400gm each) with a pack of 1kg sugar @395tk only.
ii) Lemon bright 500ml dishwasher is tk100 and 250ml is tk 50 but a combo bundle
offer of both is on tk 100 only.
iii) Fast food restaurants like KFC, BFC, Burger king following this pricing strategy.
Combo meal at these restaurants usually providing a chicken fry with a small
drink and French fries. They combine several food for combo then sells at a single
set price.
iv) Computer package with monitor, mouse, keyboard and all related accessories.

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  Cable television packages that offer a collection of channels in a single bundle or
tier.
 Software packages that offer multiple programs and/or apps with one single
purchase.
 A television purchase that also includes a speaker set, DVD player and TV stand.

Peak-load Pricing

Peak-load Pricing involves charging higher prices for consumers who require services during
periods of peak demand and lower prices for those who consume during low or off peak
periods.

Example:

Different Chinese manufacturers of kn95 mask has changed higher price on an average of tk
300 to tk 500 during march june when the coronavirus was spreading in a multiple rate
around the world.

i) Airtel offer on peak call rate at 90 paisa/min and off pick rate is 50paisa/min.

ii) It also seen in tourist spots, in seasonal time rooms at hotel cost 500tk per night
but in off season it cost 200-250 tk per night.

Rigid Pricing
Rigid pricing is pricing system that the producer of durable good should maintain existing
prices as the demand for durable goods depend on consumer’s incomes, business
expectations.

Example: Price of air condition and other electronics at the time of pandemic can be a good
example of rigid pricing. It also includes consumer goods like rice, sugar, oil, salt, milk etc.
It also includes the pricing of Bata, apex and foot wares. Their price does not change
immediately because demand for durable goods depends on consumer income and business
expectation.
Flexible Pricing

Flexible pricing is a business strategy in which a product’s final price is open for negotiation.
In other words, customers and sellers can get together and try to alter the price, i.e., either
knock it down or push it up. Flexible pricing does not only apply to the price of goods but
services too. It is, in fact, a very common strategy in tailor-made services.

The term may also refer to adapting one’s prices more closely to market forces. Market forces
are the forces of supply and demand. When demand rises or supply declines, prices go up.
Conversely, when demand declines or supply increases, prices fall.
Example: The biggest agriculture product market in Dhaka is Kawranbazar, here the pricing
strategy follows this principle also the vegetable markets in every local area in our country

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follow this. In flexible pricing also the products are kept in a state of negotiation like different
clothing store in new market because if a customer buys clothes from clothing store then the
customer need to negotiate the price. Both the sellers and buyers try to push the price or
knock it down.
Seasonal Pricing
Seasonal pricing or off season pricing refers to the pricing of product or services during the
off season. It provides beneficial to the producers when off season is long and inventory
carrying cost is high.
Example-
A) Transcom Limited offers 20% discount on their WHIRPOOL Air conditioners during
winter season in our country
b) Community Centers in Bangladesh offers upto 50% discount in summer, due to less social
functions in hot season
c) Hotels-Motels in Syhlet offers discount on room rent during winter, as winter is off season
for Syhlet
d) Hotels-Motels in Cox’s Bazar offers discount on room rent during summer, as winter is
off season for Cox’s Bazar
Going rate pricing
The Going rate pricing is a method adopted by the firms where the product is priced as per
the rates prevailing is the market especially on par with the competitors. It’s actually a
competiotrs based pricing.
Example: Huawei Y9s , Oppo A52 & A92, Xiomi Note 9 pro etc. has followed going rate
price as there is too much competition in the market.

Charm Pricing
Charm pricing is the price set by the seller to charm the buyers by giving them the impression
that the price is lower than what is actually is.
Example:
Sometimes customers and buyers are so much affected by the price. Bata and other footwares
select the price 995Tk. This shows a perception that the price is lower than the other who
selected the price 1000tk. But in reality the difference is only tk 5. In some cases it is seen
that same product is priced 971tk and 978tk but ultimately the difference is only 6tk.
Recently, SUZUKI motorcycle company launched their new bike SUZUKI GSX 125R @
Tk.134,950

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New Product pricing

Pricing strategies tend to change as a product goes through its product life cycle. One stage is
particularly challenging: the introductory stage. This is called New Product Pricing. When
companies bring out a new product, they face the challenge of setting prices for the very first
time. Two new product pricing strategies are available: Price-Skimming and Market-
Penetration Pricing
Market –skimming pricing
Setting a high price for a new product to skim maximum revenue layer by layer from the
segments willing to pay the high price; the company makes fewer but more profitable to
sales.
Many companies that invent new products set high initial prices to “skim” revenues layer by
layer from the market. For example Sony frequently uses this strategy. When Sony
introduced the world’s first high definition television (HDTV) to the Japanese market in
1990, the high-tech sets cost $43000. These television were purchased only by customers
who really wanted the new technology and could afford to pay a high price for it. Sony
rapidly reduced the price over the several years to attract a new buyers. By 1993 a 28- inch
HDTV cost a Japanese buyer just over $6000. In 2001, a Japanese consumer could buy a 40-
inch HDTV for about $2000, a price that many more customers could afford. An entry level
HDTV sets now sells for less than $500 in the US and prices continue to fall. In this way
Sony skimmed the maximum amount of revenue from the various segments of the market.
Market Penetration pricing
Setting a low price for a new product in order to attract a large number of buyers and a large
market share.
Some companies use market penetration pricing. They set a low initial price in order to
penetrate the market quickly and deeply -to attract a large number of buyers quickly and win
a large market share. The high sales volume results in falling costs, allowing the companies
to cut their prices even further. For example, Dell used penetration pricing to enter the
personal computer market, selling high quality computer products through lower-cost direct
channels. Its sales soared when HP, Apple and other competitor selling through retail stores
could not match its prices.

Conclusion

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