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  • Developing Priceing Strategy and Prog.13

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    Akash Ranjan
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    The document discusses various strategies and methods for developing pricing, including selecting objectives, determining demand factors, estimating costs, analyzing competitors, setting pricing methods, and selecting the final price. Some specific strategies covered are mark-up pricing, target return pricing, perceived value pricing, going rate pricing, auction pricing, geographical pricing, promotional pricing, and differentiated pricing. The overall focus is on analyzing relevant business and market factors to establish an effective pricing approach.

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    The document discusses various strategies and methods for developing pricing, including selecting objectives, determining demand factors, estimating costs, analyzing competitors, setting pricing methods, and selecting the final price. Some specific strategies covered are mark-up pricing, target return pricing, perceived value pricing, going rate pricing, auction pricing, geographical pricing, promotional pricing, and differentiated pricing. The overall focus is on analyzing relevant business and market factors to establish an effective pricing approach.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    10 views15 pages

    Developing Priceing Strategy and Prog.13

    Uploaded by

    Akash Ranjan
    The document discusses various strategies and methods for developing pricing, including selecting objectives, determining demand factors, estimating costs, analyzing competitors, setting pricing methods, and selecting the final price. Some specific strategies covered are mark-up pricing, target return pricing, perceived value pricing, going rate pricing, auction pricing, geographical pricing, promotional pricing, and differentiated pricing. The overall focus is on analyzing relevant business and market factors to establish an effective pricing approach.

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    © All Rights Reserved
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    of 15

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L.

    Makwana
    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana
    Selecting the Objective
     Survival
    Determining the Demand
     Maximum Current Profit

    Estimating the Cost  Maximum Market Share


     Market Skimming
    Analyzing Competitors’ Costs, Prices and Offers
     Product-Quality

    Setting a Pricing Method Leadership


     Other Objectives
    Selecting the Final Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Selecting the Objective

    Determining the Demand

    Estimating the Cost  Price Sensitivity


     Price Elasticity of
    Analyzing Competitors’ Costs, Prices and Offers
    Demand

    Setting a Pricing Method

    Selecting the Final Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Selecting the Objective

    Determining the Demand


     Fixed Costs
    Estimating the Cost
     Variable Costs
    Analyzing Competitors’ Costs, Prices and Offers  Total Costs
     Average Cost
    Setting a Pricing Method

    Selecting the Final Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Selecting the Objective

    Determining the Demand

    Estimating the Cost

    Analyzing Competitors’ Costs, Prices and Offers

    Setting a Pricing Method

    Selecting the Final Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Selecting the Objective

    Determining the Demand

    Estimating the Cost

    Analyzing Competitors’ Costs, Prices and Offers

    Setting a Pricing Method

    Selecting the Final Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Mark-up Pricing

    Variable Cost Per Unit Rs. 10


    Fixed Costs Rs. 3,00,000
    Expected Units Sales 50,000

    Fixed Costs 3,00,000


    Unit Cost = Variable Cost + = 10 + = 16
    Unit Sales 50,000

    Manufacturer wants to earn 20% mark-up on sales

    Unit Cost 16
    Mark-up Price = = = 20
    (1-Desired Return on Sales) (1- 0.20)

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Target Return Pricing

    Total Investment Rs. 10,00,000


    Expected ROI 20% (Rs.2,00,000)

    Variable Cost Per Unit Rs. 10


    Fixed Costs Rs. 3,00,000
    Expected Units Sales 50,000

    Desired Return x Invested Capital


    Target Return Price = Unit Cost +
    Unit Sales

    0.20 x 10,00,000
    Target Return Price = 16 +
    50,000

    Target Return Price = Rs. 20


    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana
    Target Return Pricing

    Total Investment Rs. 10,00,000


    Expected ROI 20% (Rs.2,00,000)

    Variable Cost Per Unit Rs. 10


    Fixed Costs Rs. 3,00,000
    Expected Units Sales 50,000

    Break Even Volume

    Fixed Costs
    Break Even Volume =
    (Price – Variable Cost)

    3,00,000
    Break Even Volume = = 30,000 Units
    (20 - 10)
    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana
    Perceived Value Pricing

    1,00,000 Equivalent to competitor’s product


    40,000 Superior durability
    30,000 Superior reliability
    20,000 Superior service
    10,000 Warranty
    2,00,000 Total Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Going Rate Pricing

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Auction Type Pricing
    a) English Auctions (Ascending Bids)
    One Seller and Many Buyers
    Bidders raise the offer price until the top price is reached.

    b) Dutch Auctions (Descending Bids)


    One Seller and Many Buyers
    Auctioneer announces a high price and slowly decreases
    the price until a bidder accepts.
    One Buyer and Many Sellers
    Buyer announces the product he wants to buy, sellers
    compete to offer the lowest price

    c) Sealed Bid Auctions

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Selecting the Objective

    Determining the Demand

    Estimating the Cost

    Analyzing Competitors’ Costs, Prices and Offers

    Setting a Pricing Method

    Selecting the Final Price

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana


    Geographical Pricing

    Price Discount and Allowances

    Promotional Pricing

    Differentiated Pricing

    1st Degree Price Discrimination : Intensity to Purchase

    2nd Degree Price Discrimination : Volume Purchased

    3rd Degree Price Discrimination : Classes of Buyers


    (Customer Segment, Product Form., Image, Channel,
    Location, Time)

    Ch 13 Developing Pricing Strategies and Programs Dr. Sandeep L. Makwana

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