Marketing Management

BBA II semester
Date: 25th June 2021

Methods of pricing
1. Based on Consumer
2. Based on Competition
3. Based on Cost and Demand
4. Based on Geographical Location

1. Based on Consumer
1) Odd-even Pricing – Under this method lower the rounded – up price of a
product. For Ex: If the T-Shirt is Rs. 250 then the marketer would probably
reduce it to Rs. 249.50 because most of the customer think this price is much
cheaper.
2) Psychological Pricing – Under this method marketer used the customer’s
emotional response to determining the price for the product.
3) Prestige Pricing – Is also known as Premium Pricing. Under this method
prices are set higher than the normal price to create an image of superior
quality and social status.
4) Dual Pricing – Refers to the sale of identical product at different prices in
different markets. It is illegal pricing practice as it done with objective of
dumping in different markets or due to government regulations. For Ex:
Petroleum prices

2. Based on Competition
1) Penetration Pricing – Under which a firm introduce a new product at
a very low price to encourage more customers to purchase the same.
For Ex: News Papers.
2) Skimmed Pricing – Under which a marketer charges a very high
premium price for a given product or service at the time introduction
to market.
3) Monopoly Pricing – Under which a marketer prices a product to
maximize profits under the assumption there is no need to worry
about competition, usually the monopoly price is higher than the price
that would prevail if competition existed.
4) Administrated Pricing – Under which price of the product set by the
Government or regulatory bodies, instead of being determined by
regular market forces of supply and Demand. For Ex: the Price of
Protroleum product in India determined by Government.

Uma Chaudhary
Assistant Professor, BEL First Grade College
 Marketing Management
BBA II semester
Date: 25th June 2021

3. Based on Cost and Demand

1) Cost plus Pricing method – Under which firstly decided the cost of
production, then profit level is determined and added to the product
cost. Therefore product price equal to the total of cost plus profit
2) Target Return Pricing - Under which a firm determine the price
based on target rate of return on investment. Therefore a pre-
determined percentage of return based on expected cost of production
and cost of selling.
3) Demand Pricing – In this prices are based on demand for the
product, if the demand is high then the prices are raised and if the
demand is low the prices are cut off.
4. Based on Geographical Location
1) FOB (Free on Board) Pricing – Under this price includes goods plus
the services of loading and unloading the products.
2) Zone Pricing – Under which setting the prices of goods or services
based on the location where they will be offered for sale to customers.
3) Base Point Pricing – Under which marketers set price on the basis of
a base point cost plus transportation charges to a given market.

Pricing policies/strategies
It is broad frame work which a company uses for the purpose of price
fixing .These policies enable a company to fix the prices appropriately
depending on the situation and also the nature of customer
Types
1) Market skimming pricing
2) Market penetration pricing’
3) Price leadership
4) Price discrimination

1. Market skimming pricing

Uma Chaudhary
Assistant Professor, BEL First Grade College
 Marketing Management
BBA II semester
Date: 25th June 2021

Price skimming is a product pricing strategy by which a firm charges the

highest initial price that customers will pay and then lowers it over time. As the
demand of the first customers is satisfied and competition enters the market,
The firm lowers the price to attract another, more price-sensitive segment of the
population.
The skimming strategy gets its name from "skimming" successive layers of
cream, or customer segments, as prices are lowered over time.
2. Market penetration pricing
Penetration pricing is a marketing strategy used by businesses to attract
customers to a new product or service by offering a lower price during its initial
offering. The lower price helps a new product or service penetrate the market
and attract customers away from competitors.
Market penetration pricing relies on the strategy of using low prices initially to
make a wide number of customers aware of a new product.
3. Price leadership
Price leadership occurs when a pre-eminent firm (the price leader) sets the price
of goods or services in its market. This control can leave the leading firm's rivals
with little choice but to follow its lead and match the prices if they are to hold
on to their market share.
Price leadership is common in oligopolies, such as the airline industry, in which
a dominant company sets the prices and other airlines feel compelled to adjust
their prices to match.
4. 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.

Uma Chaudhary
Assistant Professor, BEL First Grade College