MM 140 – PRICING STRATEGY

Unit I
Fundamental Concepts of Pricing

Charito B. Julian
Business Administration Department
College of Business, Economics and Accountancy
Mariano Marcos State University
 Outline
A. Definitions of price and pricing
B. Pricing objectives
C. Factors influencing price
determination
D. Strategic importance and
common strategies in pricing
 Learning Outcomes
At the end of the unit, the student must have:
1. defined price and its key concepts;
2. described the different pricing objectives;
3. identified the factors that influence price
determination;
4. illustrated the application of the different
pricing strategies;
 Definition of Price
 Price is the most visible
component of the marketing
mix
 Price is the only component of
the marketing mix that generates
revenue for the firm
 Definition of Pricing
Price is the amount of money needed
to acquire some want-satisfying goods
and services.

Pricing is an activity of determining

the price of a particular product
 PRICING OBJECTIVES
A. Profit-oriented goals
 To achieve target return – a
specified percentage return on
sales or on investment.
 To maximize profit – charging the
highest price possible considering
the customer’s willingness and
ability to pay.
 PRICING OBJECTIVES
B. Sales-oriented goals
 Increase sales volume –to
achieve rapid growth or to
discourage potential competitors
from catering a market.
 Maintain or increase market
share – to maintain or increase
the share of the market held by
the firm.
 PRICING OBJECTIVES
C. Status Quo Goals

 Price stabilization

 Avoidance of competition
 Factors Influencing Price
Determination
A. Internal Factors
1. Marketing Objectives
2. Marketing Mix Strategy
3. Costs
4. Organizational Considerations
 Factors Influencing Price
Determination
B. External Factors
1.The nature of market and demand
2. Consumer’s perception and price
value
3. Competitors
4. Other external factors such as the
resellers and the government
 PRICING STRATEGIES
A. Competition-oriented pricing
1. Market-penetration pricing
calls for low prices and high volume
 appropriate for new products that are
not socially visible and do not
symbolize social status
 generally useful when the market is
price sensitive
 PRICING STRATEGIES
2. Price skimming
 getting the highest price possible
since a high price is often equated with
high quality
 a skimming policy can be develop a
prestige image for the product
3. Going-rate pricing – going with the
average price
 PRICING STRATEGIES
B. Demand-oriented pricing
1. Perceived value pricing – it is based
on how consumers perceive the
product
2. Price discrimination pricing –
difference between the prices
offered to two or more buyers of
the identical product
 PRICING STRATEGIES
C. Cost-oriented pricing
1. Mark-up pricing/cost-plus pricing
– adding a certain fix percentage
on the unit cost
2. Target return pricing -
determining the price that would
bring back the cost of
investment
 PRICING STRATEGIES
D. Psychological pricing
1. odd-even pricing – odd price form of
psychological pricing is achieved by
making the end of the price as odd
number
2. price lining –different market
segments or target markets can be
served best through different prices
 PRICING STRATEGIES
D. Psychological pricing
3. prestige pricing – products are
priced high to signify product
quality
4. promotional/bait pricing – many
marketers especially retailers,
recognize that consumers love
bargains
 PRICING STRATEGIES
E. Discount pricing
1. Cash discount – to encourage early
payments
2. Quantity discount – to encourage
bulk buying
3. Seasonal discounts – to encourage
customers to buy off season
products
4. Allowances – for resellers
 References
Nagle, T., Holden, J., and Zale, J., 2011. The Strategy
and Tactics of Pricing. 5th Edition. Prentice-Hall.
ISBN-13: 978-0136106814

Simon, H., and Fassnacht, M., 2019. Price

Management: Strategy, Analysis, Decision,
Implementation. Springer. ISBN 978-3-319-99456-7
(eBook)
 Unit I
Fundamental Concepts of Pricing

Charito B. Julian
E-mail: charitobatarajulian@gmail.com
cbjuian@mmsu.edu.ph
Mobile Phone: 0927-943-1850 (Globe)
0921-505-8273 (Smart)