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Pricing Decisions of Sunil‘s Tutorial
Table of Contents
Chapter 1: Introduction and Research Methodology ................................................... 3

1.1 Project Overview .......................................................................................................... 3
1.2 Research Methodology ................................................................................................. 6
1.3 Limitations of the Project Overview ............................................................................. 6
Chapter 2: Sunil’s Tutorial – Company Overview ........................................................ 7

2.1 History of Sunil‘s Tutorial ............................................................................................ 7
2.2 Objectives and Advantages ........................................................................................... 9
2.3 Unique Selling Proposition ........................................................................................... 9
2.4 The Road Ahead ........................................................................................................... 9
2.5 Features of Sunil‘s Tutorial .......................................................................................... 9
2.6 Work Culture .............................................................................................................. 10
Chapter 3: Introduction to Pricing ............................................................................... 11

3.1 Objectives of Pricing................................................................................................... 12
3.2 Price Sensitivity .......................................................................................................... 13
3.3 Estimation of Cost....................................................................................................... 16
3.4 Determination of Price ................................................................................................ 17
Chapter 4: Pricing Decisions.......................................................................................... 20

4.1 Importance of Pricing ................................................................................................. 22
4.2 Objectives of Pricing Decisions .................................................................................. 24
4.3 Factors influencing Pricing Decisions ........................................................................ 25
4.4 Pricing Approaches ..................................................................................................... 27
4.5 Pricing Policies ........................................................................................................... 29
Chapter 5: Pricing Strategies ......................................................................................... 38

5.1 New Product Pricing Strategies .................................................................................. 38
5.2 Product-Mix Pricing Strategies ................................................................................... 40
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5.3 Price Adjustment Strategies ........................................................................................ 42

5.4 Price Change ............................................................................................................... 48
Chapter 6: Pricing Decisions of Sunil’s Tutorial ......................................................... 49

6.1 Courses Offered .......................................................................................................... 49
6.2 Average Number of Students ...................................................................................... 50
6.3 Fixed Expenses ........................................................................................................... 53
6.4 Internal Factors affecting Price ................................................................................... 54
6.5 External Factors affecting Price .................................................................................. 55
Chapter 7: Price Determination .................................................................................... 56

7.1 Cost Inflation Index .................................................................................................... 58
7.2 Real Income with respect to Gold Price ..................................................................... 59
Chapter 8: Current Fee Structure................................................................................. 60
Chapter 9: Conclusion .................................................................................................... 62
Chapter 10: Bibliography .............................................................................................. 63
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Chapter 1: Introduction and Research Methodology
1.1 Project Overview

An overview of Tutorials in India:
One out of every four students in India takes private tuition and in a couple of
states more than three out of every four students, or over 75%, opt for it, according to a
report by the National Sample Survey Office (NSSO).
Taking private coaching classes individually or in a group, at home or at any other place,
by a single or more tutors for different reasons has become a norm, the survey
underlined. More students opting for private tuition reflects poorly on the quality of
education in schools and colleges.
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―In this survey...it is noted that in states like Tripura (around 81%) and West Bengal
(around 78%) majority of students were taking private coaching (combining school
education and higher education), whereas at all-India level 1/4th of students were taking
private coaching,‖ the NSSO survey said.
What is interesting is that though private coaching is prevalent across India, in eastern
states it is very high. For example, in West Bengal, 89% of male secondary and higher
secondary students avail of private tuition. For the same category of pupils, the national
average is 37.8%. Tripura, a close second at 87%, followed by Bihar (67.2%) and Odisha
(63.4%) top the list of states where maximum number of students opt for private
coaching. For a similar category of students at the primary level, Tripura (78.3%)
replaces West Bengal (71.1%) at the top of the list. Daman and Diu (58.8%), Chandigarh
(49.4%), Bihar (46.8%) and Odisha (45%) are the other top states and Union territories
where students avail of private tuition.
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Even in Delhi, 32.2% of the male students and 36.6% of the female students at primary
schools avail of private tuition, the NSSO survey showed.
Private tuition is thriving because the education system in India has deteriorated over the
last several years. While quality of teaching has gone down across verticals, the exam
system remains the same. The outcome—students and parents will believe in
supplementary education like coaching for passing an exam or cracking a competitive
exam
It‘s difficult to believe that in Uttar Pradesh, the dependency on private tuition is low.
According to the data, in Uttar Pradesh only 12.2% of male students are availing of
tuition at primary level and 13.7% in upper primary level as against the national average
of 23.1% and 28%, respectively. Similarly, only 15.8% of Uttar Pradesh students avail of
coaching at graduation level and 9.5% at post-graduation and above levels are availing of
private coaching against the national average of 20.3% and 13%, respectively.
And if you think that private tuition is just a school phenomenon, change your mind.
According to NSSO data, 20% of Indians pursuing degree courses and 13% pursuing
postgraduate courses and above avail of private tuition.
This issue is not India-specific and exists in many developing and developed countries.
According to a research paper by Accountability Initiative, part of the Centre for Policy
Research think tank, 70% of students in Japan get private tuition by the time they
complete middle school; 83% students in Malaysia receive tutoring by the time they
reach senior secondary school.
Similarly, 83.1% of primary school students, 92.8% of middle school students and 87.8%
of high school students in South Korea attend private tuition, according to the research
paper.
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1.2 Research Methodology
1) To understand how to make Pricing Decisions

2) To maximize long run profit
3) To maximize short run profit
4) To obtain a target rate of return on investment
5) Decisions regarding fees structure
1.3 Limitations of the Project Overview
1) The information provided may not be completely reliable.

2) All the analysis and recommendations will need reconsideration.
3) As the Sunil‘s Tutorial reports are very confidential the information is not
disclosed completely.
4) Some analyses have been done for backward data to predict the future trend and
make suggestions.
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Chapter 2: Sunil’s Tutorial – Company Overview
2.1 History of Sunil’s Tutorial
Sunil‘s Tutorial is a private academic coaching program founded by Mrs. Sunita

Mirwani, Mr. Sunil Mirwani and Mr. Deepak Mirwani in the year 1991. The first branch
was set up at Versova (Andheri West) and the next four years they mainly concentrated
on the promotion of the classes and also to give quality teaching to the students who took
admission. In the year 1995 a new branch was started at Seven Bungalows not very far
from the original one, but only lasted for three to four months due to certain reasons.
Next was the introduction of Computers in the classes which made things very easy for
the professors as well as the students and it started of really well but due to the high
maintenance cost of the machine there were losses faced and in the next two years the
computers were taken out. The year 2000 was a start of a new branch at Jaiwant Society
till 2005. In these five years the profit level was almost the same and did not increase
much as there was recession in the Indian Economy after the 1997 Southeast Asian
Market Crash, in 1999 the Indian Property market also crashed. In the year 2005 the
branch at Jaiwant Society and the Original one at Versova were shut due to some definite
reasons.
This was the start of Sunil‘s Tutorials and for the promotion in the initial stages of the
classes various methods of marketing were used. Some of them are as follows:
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Year Method of Promotion Cost
Rs.60 per thousand

Distribution of Handbills/Leaflets.
for distribution and
1991-2000 (50,000 per week)
Rs.6000 for printing.
Posters (1000 posters every month)
Rs.600 to Rs.800 per
wall.
Rs.1,20,000 for the
1995 Transport Services (Contessa Car and car.

Matador Van) Rs.500 Petrol per
week
Van outsourced at
Rs.100 per student
Incorporation of Computers (3 HP Rs.45,000 each.

1998
Computers and a supervisors) Rs.12,000 p.m.
In the aforementioned year they rented a property in RNA Lokhandwala to start of their
coaching classes again. In the following year another property was rented and also for
further expansion they hired more professors. Due to some adequate reasons the
professors discontinued their work at Sunil‘s Tutorials, later in 2007 with one of the
property, they were working towards progress but due to some unfortunate space issues,
later in 2012 they got shifted to a property where the lectures are being held currently.
In the year 2005 they tied up with various publishers and outsourced prospectus that
acted as a source of Marketing. The year 2009 saw the inception of webinars which are
like seminars online. Lectures uploaded by teachers which can be viewed by students by
logging onto the website.
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2.2 Objectives and Advantages
1) Competent faculty.
2) Comprehensive study material.
3) Suitable batch timing.
4) Centralized location.
5) Pedagogy – 900 hours of interactive learning by a pool of highly qualified and
experienced faculty.
6) Small batch size so that each student receives personal attention, thus helping
them to grasp more.
2.3 Unique Selling Proposition
1) Personal attention to Students as there are small batches.

2) Recorded lectures for students.
2.4 The Road Ahead
With the increasing number of admissions there is an increase in space issues.

Therefore for further expansion a new property has been bought right adjacent to the
current one having an area of 600 square feet worth Rs.1 crore.
2.5 Features of Sunil’s Tutorial
1) Impart knowledge with understanding

2) Motivate them to score highly
3) Hone their abilities at problem solving
4) Educate and stimulate students minds
5) Encourage students to ―want to learn‖
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2.6 Work Culture
If there's one thing that defines the most successful companies, it's not their bottom line -
it's their values. At Sunil‘s Tutorial, the values we stand by have made us who we are
today. They've shaped our culture, our work ethics, and our decisions; helping us push
the envelope and be more than what we were yesterday.
Client Value:
To surpass client expectations consistently.
Leadership by Example:
To set standards in our business and transactions and to be an exemplar for the industry
and ourselves.
Integrity and Transparency:
To be ethical and sincere in all our transactions.
Fairness:
To be objective and transaction-oriented, and thereby earn trust and respect.
Excellence:
To strive relentlessly; constantly improve ourselves, our teams, and our services and
products to become the best.
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Chapter 3: Introduction to Pricing
Pricing is the process whereby a business sets the price at which it will sell its
products and services, and may be part of the business's marketing plan. In setting prices,
the business will take into account the price at which it could acquire the goods,
the manufacturing cost, the market place, competition, market condition, brand, and
quality of product.
Pricing is also a key variable in microeconomic price allocation theory. Pricing is a

fundamental aspect of financial modeling and is one of the four Ps of the marketing mix.
(The other three aspects are product, promotion, and place.) Price is the only revenue
generating element amongst the four Ps, the rest being cost centers. However, the other
Ps of marketing will contribute to decreasing price elasticity and so enable price increases
to drive greater revenue and profits.
Pricing can be a manual or automatic process of applying prices to purchase and sales
orders, based on factors such as: a fixed amount, quantity break, promotion or sales
campaign, specific vendor quote, price prevailing on entry, shipment or invoice date,
combination of multiple orders or lines, and many others. Automated systems require
more setup and maintenance but may prevent pricing errors. The needs of the consumer
can be converted into demand only if the consumer has the willingness and capacity to
buy the product.
Thus, pricing is the most important concept in the field of marketing; it is used as a
tactical decision in response to comparing market situation.
PRICE = COST + PROFIT
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3.1 Objectives of Pricing
1) To achieve the financial goals of the company (i.e. profitability)

2) To fit the realities of the marketplace (will customers buy at that price)
3) To support a product's market positioning and be consistent with the other
variables in the marketing mix
4) Price is influenced by the type of distribution channel used, the type of
promotions used, and the quality of the product.
5) Price will usually need to be relatively high if manufacturing is expensive,
distribution is exclusive, and the product is supported by
extensive advertising and promotional campaigns.
6) A low cost price can be a viable substitute for product quality, effective
promotions, or an energetic selling effort by distributors.
From the marketer's point of view, an efficient price is a price that is very close to
the maximum that customers are prepared to pay. In economic terms, it is a price that
shifts most of the consumer economic surplus to the producer.
A good pricing strategy would be the one which could balance between the price floor
(the price below which the organization ends up in losses) and the price ceiling (the price
be which the organization experiences a no-demand situation).
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3.2 Price Sensitivity
Elasticity of Demand is an indicator of the degree of responsiveness, or

sensitiveness of demand for a commodity to a change in its price.
Price elasticity of demand (PED or Ed) is a measure used in economics to show the
responsiveness, or elasticity, of the quantity demanded of a good or service to a change in
its price, ceteris paribus (Other things remaining constant). More precisely, it gives the
percentage change in quantity demanded in response to a one percent change in price.
Price elasticity is almost always negative, although analysts tend to ignore the sign even
though this can lead to ambiguity. Only goods which do not conform to the law of
demand, such as Veblen and Giffen goods have a positive PED. In general, the demand
for a good is said to be inelastic (or relatively inelastic) when the PED is less than one (in
absolute value): that is, changes in price have a relatively small effect on the quantity of
the good demanded. The demand for a good is said to be elastic (or relatively elastic)
when its PED is greater than one (in absolute value): that is, changes in price have a
relatively large effect on the quantity of a good demanded.
Revenue is maximized when price is set so that the PED is exactly one. The PED of a
good can also be used to predict the incidence of a tax on that good. Various research
methods are used to determine price elasticity, including test markets, analysis of
historical sales data.
The above formula usually yields a negative value, due to the inverse nature of the
relationship between price and quantity demanded, as described by the "law of
demand".
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For example, if the price increases by 5% and quantity demanded decreases by 5%, then
the elasticity at the initial price and quantity = −5%/5% = −1. The only classes of goods
which have a PED of greater than 0 are Veblen and Giffen goods. Although the PED is
negative for the vast majority of goods and services, economists often refer to price
elasticity of demand as a positive value (i.e., in absolute value terms). This measure of
elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.e.,
the elasticity of demand with respect to the good's own price, in order to distinguish it
from the elasticity of demand for that good with respect to the change in the price of
some other good, i.e., a complementary or substitute good. The latter type of elasticity
measure is called a cross-price elasticity of demand.
As the difference between the two prices or quantities increases, the accuracy of the PED
given by the formula above decreases for a combination of two reasons. First, the PED
for a good is not necessarily constant; as explained below, PED can vary at different
points along the demand curve, due to its percentage nature. Elasticity is not the same
thing as the slope of the demand curve, which is dependent on the units used for both
price and quantity. Second, percentage changes are not symmetric; instead, the
percentage change between any two values depends on which one is chosen as the
starting value and which as the ending value.
For example, if quantity demanded increases from 10 units to 15 units, the percentage
change is 50%, i.e., (15 − 10) ’ 10 (converted to a percentage). But if quantity demanded
decreases from 15 units to 10 units, the percentage change is −33.3%, i.e., (10 − 15) ÷ 15.
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What Influences price sensitivity?
Shared
Cost
Difficult End
Comparison Benefits
Subsitute Total
Awarness Expenditure
Unique Low cost

Value
Effect items
Items
Sunk
bought more
Investment
frequently
Inventory
Effects
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3.3 Estimation of Cost
An approximation of the probable cost of a product, program, or project,

computed on the basis of available information.
Four common types of cost estimates are:
1) Planning estimate: a rough approximation of cost within a reasonable range of

values, prepared for information purposes only.
2) Budget estimate: an approximation based on well-defined (but preliminary) cost
data and established ground rules.
3) Firm estimate: a figure based on cost data sound enough for entering into a
binding contract.
4) Not-to-exceed /Not-less-than estimate: the maximum or minimum amount
required to accomplish a given task, based on a firm cost estimate.
There are different ways of estimating cost:
1) Fixed Cost - A fixed cost is a cost that does not change with an increase or decrease
in the amount of goods or services produced or sold. Fixed costs are expenses that
have to be paid by a company, independent of any business activity.
2) Variable Cost - Variable costs are costs that change in proportion to the good or
service that a business produces. Variable costs are also the sum of marginal
costs over all units produced. They can also be considered normal costs. Fixed
costs and variable costs make up the two components of total cost.
3) Learning Curve - A learning curve is a concept that graphically depicts the

relationship between cost and output over a defined period of time, normally to
represent the repetitive task of an employee or worker. In the visual representation a
steeper slope indicates initial learning translates into higher cost savings, and
subsequent learning results in increasingly slower, more difficult cost savings
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4) Activity-based costing (ABC) - Is a costing methodology that identifies activities in

an organization and assigns the cost of each activity with resources to all products and
services according to the actual consumption by each. This model assigns
more indirect costs (overhead) into direct costs compared to conventional costing.
5) Target costing - is an approach to determine a product's life-cycle cost which should

be sufficient to develop specified functionality and quality, while ensuring its desired
profit. It involves setting a target cost by subtracting a desired profit margin from a
competitive market price.
3.4 Determination of Price
For many consumers, price seems to change with a one-way ratchet set to "up."
However, economists argue that price is actually set by market forces, balancing supply
and demand in order to optimize output with minimal waste. Although it may seem that
prices are set randomly, economists explain that price determination is a rational process
calculated in a straightforward manner.
Supply
Producers want to sell as many units as possible at as high a price as possible.
Selling a $5 product for $100 is a great deal for any entrepreneur. However, the lower the
final price, the fewer units of product or service a provider will put into circulation. Thus,
supply, or the amount of product or service offered, increases as the price increases.
Demand
Customers will generally demand more of a product at a lower cost. For example,
there are more people who would be willing to pay 50 cents for a big-screen TV than
those who would pay $500, and fewer still who would be willing to pay $5,000. In this
way, it can be said that the demand for a product falls as the price increases.
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Factors affecting Price Determination of a Product
1) Product Cost: The most important factor affecting the price of a product is its cost.
Product cost refers to the total of fixed costs, variable costs and semi variable costs
incurred during the production, distribution and selling of the product. Fixed costs are
those costs which remain fixed at all the levels of production or sales. For example,
rent of building, salary, etc. Variable costs refer to the costs which are directly related
to the levels of production or sales. For example, costs of raw material, labour costs
etc. Semi variable costs are those which change with the level of activity but not in
direct proportion. For example, fixed salary of Rs 12,000 + upto 6% graded
commission on increase in volume of sales. The price for a commodity is determined
on the basis of the total cost. So sometimes, while entering a new market or launching
a new product, business firm has to keep its price below the cost level but in the long
rim, it is necessary for a firm to cover more than its total cost if it wants to survive
amidst cut-throat competition.
2) The Utility and Demand: Usually, consumers demand more units of a product when
its price is low and vice versa. However, when the demand for a product is elastic,
little variation in the price may result in large changes in quantity demanded. In case
of inelastic demand, a change in the prices does not affect the demand significantly.
Thus, a firm can charge higher profits in case of inelastic demand. Moreover, the
buyer is ready to pay up to that point where he perceives utility from product to be at
least equal to price paid. Thus, both utility and demand for a product affect its price
3) Extent of Competition in the Market: The next important factor affecting the price
for a product is the nature and degree of competition in the market. A firm can fix any
price for its product if the degree of competition is low. However, when the level of
competition is very high, the price of a product is determined on the basis of price of
competitors‘ products, their features and quality etc. For example, MRF Tyre
company cannot fix the prices of its Tyres without considering the prices of
Bridgestone Tyre Company, Goodyear Tyre company etc.
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4) Government and Legal Regulations: The firms which have monopoly in the
market, usually charge high price for their products. In order to protect the interest of
the public, the government intervenes and regulates the prices of the commodities for
this purpose; it declares some products as essential products for example. Lifesaving
drugs etc.
5) Pricing Objectives: Another important factor, affecting the price of a product or

service is the pricing objectives.
Following are the pricing objectives of any business:
a. Profit Maximization: Usually the objective of any business is to maximize the
profit. During short run, a firm can earn maximum profit by charging high price.
However, during long run, a firm reduces price per unit to capture bigger share of
the market and hence earn high profits through increased sales.
b. Obtaining Market Share Leadership: If the firm‘s objective is to obtain a big
market share, it keeps the price per unit low so that there is an increase in sales.
c. Surviving in a Competitive Market: If a firm is not able to face the competition
and is finding difficulties in surviving, it may resort to free offer, discount or may
try to liquidate its stock even at BOP (Best Obtainable Price).
d. Attaining Product Quality Leadership: Generally, firm charges higher prices to
cover high quality and high cost if it‘s backed by above objective.
6) Marketing Methods Used: The various marketing methods such as distribution

system, quality of salesmen, advertising, type of packaging, customer services, etc.
also affect the price of a product. For example, a firm will charge high profit if it is
using expensive material for packing its product.
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Chapter 4: Pricing Decisions
Organizations producing goods and services need to set the price for their
product. Setting the price for an organization's product is one of the most important
decisions a manager faces. It is one of the most crucial and difficult decisions a firm's
manager has to make. Pricing is a profit planning exercise.
Factors affecting Price Determination:
Customers
Competitors
Cost
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Customer:
In a situation where the product has many substitutes, customers decide the price.
That is, the demand of customers is the paramount importance in setting the price of the
product. In such a situation, the firm should try to deliver the value, in the form of
product and/or service, at the target cost so that a reasonable profit can be earned.
Similarly, under competitive condition, price is determined by market forces and an
individual firm or an individual customer cannot influence the price.
Competitors:
When there are only few players in the market, competitors usually, react to the
price changes and, therefore, pricing decisions are influenced by the possible reaction of
competitors. As such management must keep watchful eye on the firm's competitors.
That is, knowledge of competitors' strategy is essential for pricing decision in an
oligopoly situation.
Cost:
Cost is the third major factor. Its role in price setting varies widely among
industries. Some industries determine price by market forces and in some industries,
managers set prices a on the basis of production costs. Firms want to charge a price that
covers its costs like production costs, distribution costs and costs relate with selling the
product and also including a fair return for its effort.
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4.1 Importance of Pricing
How you set your prices can have a host of implications for your business. Not
every price you set needs to maximize your margins. Many small businesses use price to
compete, change market share or create different revenue scenarios. Understanding how
pricing affects your business model, not just your bottom line, will help you better choose
price levels.
1) Profit Margin:
The price you set affects your profit margin per unit sold, with higher prices giving
you a higher profit per item if you don‘t lose sales. However, higher prices that lead
to lower sales volumes can decrease, or wipe out, your profits, because your overhead
costs per unit increase as you sell fewer units.
2) Sales Volumes:
One of the most obvious affects pricing will have on your business is an increase or
decrease in sales volume. Economists study price elasticity, or the response of
consumer purchasing to a price change. Increasing your prices might lower your sales
volume only slightly, helping you make up for decreased volume with higher total
profits generated by higher margins. Lowering your prices can increase your profits if
your sales jump significantly, decreasing your overhead expense per unit. Test the
market‘s response to price increases by changing prices in targeted areas before
instituting an across-the-board price increase.
3) Position:
The price you set sends a message to some consumers about your business, product or
service, creating a perceived value. This affects your brand, image or position in the
marketplace. For example, higher prices tell some consumers that you have higher
quality, or you wouldn‘t be able to charge those prices. Other consumers look for
low-priced products and services, believing they‘ll get the quality they need at a low
price. Offering sales, discounts, rebates and closeouts can send the message you can‘t
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sell your products or services at your regular price, or tell buyers they have a short-
term opportunity to get a bargain.
4) Market Share:
The price you set makes you more or less competitive in the marketplace, affecting
your share of the market‘s volume. Some businesses lower prices temporarily to gain
market share from competitors, who can‘t respond to and meet a price decrease. After
consumers have had time to try your product and develop a brand preference or
loyalty, you can raise your prices again to a level that won‘t cause them to leave you.
Predatory pricing is the practice of selling a product or service below cost for the
specific purpose of taking market share away from a competitor or closing it down,
then raising prices on consumers when they have fewer, or no options after that
competitor is gone. This is illegal.
5) Loss Leaders:
Some businesses price products or services at or below cost to get customers into
their businesses, who then spend more money elsewhere. For example, big-box
retailers might buy large quantities of tennis balls, selling them at or below cost to
entice affluent tennis players who use many cans of balls during the year into their
stores. By placing the low-cost balls at the back of the store, they hope to generate
impulse buys as the shopper walks to the sports area and back to the front.
Restaurants offer low-margin specials to offer a change-of-pace to regular diners to
keep their normal business, or to let regulars bring friends who want upscale dishes at
a moderately priced eatery.
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4.2 Objectives of Pricing Decisions
Formulation of pricing policy begins with the classification of the basic objectives
of the firm. Pricing objectives have to be in conformity with overall organizational
objectives. In most of the situation, profit maximization is the main objective of price
policy, but it is only one objective. Following may be other objectives of pricing policy in
an organization:
1. Pricing the goods based on reasonable costs
2. Increase the market share or growth rate at the expense of immediate

profits.
3. Avoid adverse public reaction consequent on charging high price.
.
4. Ethical consideration not to reap high profit.
5. Immediate survival of the firm
6. Charge reasonable price so as to have good relations with government

and public at large
7. Maximization of prestige of the firm rather than profit
8. To safeguard against the emergence of new producers in same line
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4.3 Factors influencing Pricing Decisions
A. Internal Factors:
1) Cost:
While fixing the prices of a product, the firm should consider the cost involved in
producing the product. This cost includes both the variable and fixed costs. Thus,
while fixing the prices, the firm must be able to recover both the variable and fixed
costs.
2) The predetermined objectives:
While fixing the prices of the product, the marketer should consider the objectives of
the firm. For instance, if the objective of a firm is to increase return on investment,
then it may charge a higher price, and if the objective is to capture a large market
share, then it may charge a lower price.
3) Image of the firm:
The price of the product may also be determined on the basis of the image of the firm
in the market. For instance, HUL and Procter & Gamble can demand a higher price
for their brands, as they enjoy goodwill in the market.
4) Product life cycle:
The stage at which the product is in its product life cycle also affects its price. For
instance, during the introductory stage the firm may charge lower price to attract the
customers, and during the growth stage, a firm may increase the price.
5) Credit period offered:
The pricing of the product is also affected by the credit period offered by the
company. Longer the credit period, higher may be the price, and shorter the credit
period, lower may be the price of the product.
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6) Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the firm
incurs heavy advertising and sales promotion costs, then the pricing of the product
shall be kept high in order to recover the cost.
B. External Factors:
1) Competition:
While fixing the price of the product, the firm needs to study the degree of competi-
tion in the market. If there is high competition, the prices may be kept low to
effectively face the competition, and if competition is low, the prices may be kept
high.
2) Consumers:
The marketer should consider various consumer factors while fixing the prices. The
consumer factor‘s that must be considered includes the price sensitivity of the buyer,
purchasing power, and so on.
3) Government control:
Government rules and regulation must be considered while fixing the prices. In
certain products, government may announce administered prices, and therefore the
marketer has to consider such regulation while fixing the prices.
4) Economic conditions:
The marketer may also have to consider the economic condition prevailing in the
market while fixing the prices. At the time of recession, the consumer may have less
money to spend, so the marketer may reduce the prices in order to influence the
buying decision of the consumers.
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5) Channel intermediaries:
The marketer must consider a number of channel intermediaries and their

expectations. The longer the chain of intermediaries, the higher would be the prices of
the goods.
4.4 Pricing Approaches
Cost based Buyer based Competition

approach approach based
• Cost Plus • Perceive Value approach
• Break Even • Going Rate
• Sealed Bid
The Cost-Based Approach:
1) Cost Plus Pricing
Cost-plus pricing is a pricing strategy in which the selling price is determined by

adding a specific dollar amount markup to a product's unit cost. Mark ups are when
you add a % to the cost to set the price. An alternative pricing method is value-based
pricing. Cost-plus pricing is often used on government contracts (cost-plus contracts),
and was criticized for reducing pressure on suppliers to control direct costs, indirect
costs and fixed costs whether related to the production and sale of the product or
service or not. Cost breakdowns must be deliberately maintained. This information is
necessary to generate accurate cost estimates.
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2) Break-Even Analysis and Target-Profit Pricing
The break-even point (BEP) in economics, business, and specifically cost accounting,
is the point at which total cost and total revenue are equal: there is no net loss or gain,
and one has "broken even." A profit or a loss has not been made,
although opportunity costs have been "paid", and capital has received the risk-
adjusted, expected return. In short, all costs that needs to be paid are paid by the firm
but the profit is equal to 0
The Buyer-Based Approach:
Perceive-Value Pricing
The valuation of good or service according to how much consumers are willing to pay
for it, rather than upon its production and delivery costs. Using a perceived value
pricing technique might be somewhat arbitrary, but it can greatly assist in the
effective marketing of a product since it sets product pricing in line with its perceived
value by potential buyers.
The Competition Based Approach
1) Going-Rate Pricing
Setting a price for a product or service using the prevailing market price as a basis.
Going rate pricing is a common practice with homogeneous products with very little
variation from one producer to another, such as aluminum or steel.
2) Sealed-Bid Pricing
Document enclosed in a glued (sealed) envelope and submitted in response to

invitation-to-bid (ITB). Sealed bids received up to the deadline date are generally
opened at a stated time and place (usually in the presence of anyone who may wish to
be present) and evaluated for award of a contract.
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4.5 Pricing Policies
(A) Considerations Involved in Formulating the Pricing Policy:
1) Competitive Situation:
Pricing policy is to be set in the light of competitive situation in the market. We have
to know whether the firm is facing perfect competition or imperfect competition. In
perfect competition, the producers have no control over the price. Pricing policy has
special significance only under imperfect competition.
2) Goal of Profit and Sales:
The businessmen use the pricing device for the purpose of maximizing profits. They
should also stimulate profitable combination sales. In any case, the sales should bring
more profit to the firm.
3) Long Range Welfare of the Firm:
Generally, businessmen are reluctant to charge a high price for the product because
this might result in bringing more producers into the industry. In real life, firms want
to prevent the entry of rivals. Pricing should take care of the long run welfare of the
company.
4) Flexibility:
Pricing policies should be flexible enough to meet changes in economic conditions of

various customer industries. If a firm is selling its product in a highly competitive
market, it will have little scope for pricing discretion. Prices should also be flexible to
take care of cyclical variations.
5) Government Policy:
The government may prevent the firms in forming combinations to set a high price.
Often the government prefers to control the prices of essential commodities with a
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view to prevent the exploitation of the consumers. The entry of the government into
the pricing process tends to inject politics into price fixation.
6) Overall Goals of Business:
Pricing is not an end in itself but a means to an end. The fundamental guides to
pricing, therefore, are the firms overall goals. The broadest of them is survival. On a
more specific level, objectives relate to rate of growth, market share, maintenance of
control and finally profit. The various objectives may not always be compatible. A
pricing policy should never be established without consideration as to its impact on
the other policies and practices.
7) Price Sensitivity:
The various factors which may generate insensitivity to price changes are variability
in consumer behavior, variation in the effectiveness of marketing effort, nature of the
product. Importance of service after sales, etc. Businessmen often tend to exaggerate
the importance of price sensitivity and ignore many identifiable factors which tend to
minimize it.
8) Routinization of Pricing:
A firm may have to take many pricing decisions. If the data on demand and cost are
highly conjectural, the firm has to rely on some mechanical formula. If a firm is
selling its product in a highly competitive market, it will have little scope for price
discretion. This will have the way for routinized pricing.
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(B) Objectives of Pricing Policy:
The pricing policy of the firm may vary from firm to firm depending on its
objective. In practice, we find many prices for a product of a firm such as wholesale
price, retail price, published price, quoted price, actual price and so on. Special discounts,
special offers, methods of payment, amounts bought and transportation charges, trade-in
values, etc., are some sources of variations in the price of the product.
For pricing decision, one has to define the price of the product very carefully. Pricing
decision of a firm in general will have considerable repercussions on its marketing
strategies. This implies that when the firm makes a decision about the price, it has to
consider its entire marketing efforts. Pricing decisions are usually considered a part of the
general strategy for achieving a broadly defined goal.
While setting the price, the firm may aim at the following objectives:
1) Price-Profit Satisfaction:
The firms are interested in keeping their prices stable within certain period of time
irrespective of changes in demand and costs, so that they may get the expected profit.
2) Sales Maximization and Growth:
A firm has to set a price which assures maximum sales of the product. Firms set a
price which would enhance the sale of the entire product line. It is only then; it can
achieve growth.
3) Making Money:
Some firms want to use their special position in the industry by selling product at a
premium and make quick profit as much as possible.
4) Preventing Competition:
Unrestricted competition and lack of planning can result in waste¬ful duplication of

resources. The price system in a competitive economy might not reflect society‘s real
needs. By adopting a suitable price policy the firm can restrict the entry of rivals.
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5) Market Share:
The firm wants to secure a large share in the market by following a suitable price
policy. It wants to acquire a dominating leadership position in the market. Many
managers believe that revenue maximisation will lead to long run profit maximisation
and market share growth.
6) Survival:
In these days of severe competition and business uncertainties, the firm must set a
price which would safeguard the welfare of the firm. A firm is always in its survival
stage. For the sake of its continued existence, it must tolerate all kinds of obstacles
and challenges from the rivals.
7) Market Penetration:
Some companies want to maximise unit sales. They believe that a higher sales
volume will lead to lower unit costs and higher long run profit. They set the lowest
price, assuming the market is price sensitive. This is called market penetration
pricing.
8) Marketing Skimming:
Many companies favor setting high prices to ‗skim‘ the market. DuPont is a prime
practitioner of market skimming pricing. With each innovation, it estimates the
highest price it can charge given the comparative benefits of its new product versus
the available substitutes.
9) Early Cash Recovery:
Some firms set a price which will create a mad rush for the product and recover cash
early. They may also set a low price as a caution against uncertainty of the future.
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10) Satisfactory Rate of Return:
Many companies try to set the price that will maximize current profits. To estimate
the demand and costs associated with alternative prices, they choose the price that
produces maximum current profit, cash flow or rate of return on investment.
Factors involved in pricing Policy:
Cost Demand
Data Factor
Consumer
Psychology Competition
Government
Profit Poilcy
1) Cost Data in Pricing:
Cost data occupy an important place in the price setting processes. There are
different types of costs incurred in the production and marketing of the product. There
are production costs, promotional expenses like advertising or personal selling as well
as taxation, etc. They may necessitate an upward fixing of price. For example, the
prices of petrol and gas are rising due to rise in the cost of raw materials, such as
crude transportation, refining, etc.
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If costs go up, price rise can be quite justified. However, their relevance to the pricing
decision must neither be underestimated nor exaggerated. For setting prices apart
from costs, a number of other factors have to be taken into consideration. They are
demand and competition.
Costs are of two types: fixed costs and variable costs. In the short period, that is, the
period in which a firm wants to establish itself, the firm may not cover the fixed costs
but it must cover the variable cost. But in the long run, all costs must be covered. If
the entire costs are not covered the producer stops production. Subsequently, the
supply is reduced which, in turn, may lead to higher prices. If costs are not covered,
the producer stops production. Subsequently, the supply is reduced which in turn,
may lead to higher prices. If costs were to determine prices why do so many
companies report losses. There are marked differences in costs as between one
producer and another. Yet the fact remains that the prices are very close for a
somewhat similar product. This is the very best evidence of the fact that costs are not
the determining factors in pricing. In fact, pricing is like a tripod. It has three legs. In
addition to costs, there are two other legs of market demand and competition. It is no
more possible to say that one or another of these factors determines price than it is to
assert that one leg rather than either of the other two supports a tripod.
Price decisions cannot be based merely on cost accounting data which only contribute
to history while prices have to work in the future. Again it is very difficult to measure
costs accurately. Costs are affected by volume, and volume is affected by price. The
management has to assume some desired price-volume relationship for determining
costs. That is why costs play even a less important role in connection with new
products than with the older ones. Until the market is decided and some idea is
obtained about volume, it is not possible to determine costs. Regarding the role of
costs in pricing, Nickerson observes that the cost may be regarded only as an
indicator of demand and price. He further says that the cost at any given time
represents a resistance point to the lowering of price. Again, costs determine profit
margins at various levels of output.
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Cost calculation may also help in determining whether the product whose price is
determined by its demand, is to be included in the product line or not. What costs
determine is not the price, but whether the production can be profitably produced or
not is very important.
Relevant Costs: The question naturally arises: ―What then are the relevant costs for
pricing decision‘? Though in the long run, all costs have to be covered, for
managerial decisions in the short run, direct costs are relevant. In a single product
firm, the management would try to cover all the costs.
In a multi-product firm, problems are more complex. For pricing decision, relevant
costs are those costs that are directly traceable to an individual product. Ordinarily,
the selling price must cover a direct costs that are attributable to a product. In
addition, it must contribute to the common cost and to the realization of profit. If the
price, in the short run, is lower than the cost, the question arises, whether this price
covers the variable cost. If it covers the variable cost, the low price can be accepted.
But in the long run, the firm cannot sell at a price lower than the cost. Product pricing
decision should be lower than the cost. Product pricing decision should, therefore, be
made with a view to maximize company‘s profits in the long run.
2) Demand Factor in Pricing:
In pricing of a product, demand occupies a very important place. In fact, demand

is more important for effective sales. The elasticity of demand is to be recognised in
determining the price of the product. If the demand for the product is inelastic, the
firm can fix a high price. On the other hand, it the demand is elastic, it has to fix a
lower price.
In the very short term, the chief influence on price is normally demand.
Manufacturers of durable goods always set a high price, even though sales are
affected. If the price is too high, it may also affect the demand for the product. They
wait for arrival of a rival product with competitive price. Therefore, demand for
product is very‘ sensitive to price changes.
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3) Consumer Psychology in Pricing:
Demand for the product depends upon the psychology of the consumers.
Sensitivity to price change will vary from consumer to consumer. In a particular
situation, the behavior of one individual may not be the same as that of the other. In
fact, the pricing decision ought to rest on a more incisive rationale than simple
elasticity. There are consumers who buy a product provided its quality is high.
Generally, product quality, product image, customer service and promotion activity
influence many consumers more than the price. These factors are qualitative and
ambiguous. From the point of view of consumers, prices are quantitative and
unambiguous.
Price constitutes a barrier to demand when is too low, just as much as where it is too
high. Above a particular price, the product is regarded as too expensive and below
another price, as constituting a risk of not giving adequate value. If the price is too
low, consumers will tend to think that a product of inferior quality is being offered.
With an improvement in incomes, the average consumer becomes quality conscious.
This may lead to an increase in the demand for durable goods. People of high
incomes buy products even though their prices are high. In the affluent societies,
price is the indicator of quality. Advertisement and sales promotion also contribute
very much in increasing the demand for advertised products. Because he consumer
thinks that the advertised products are of good quality. The income of the consumer,
the standard of living and the price factor influence the demand for various products
in the society.
4) Competition Factor in Pricing:
Market situation plays an effective role in pricing. Pricing policy has some
managerial discretion where there is a considerable degree of imperfection in
competition. In perfect competition, the individual producers have no discretion in
pricing. They have to accept the price fixed by demand and supply.
In monopoly, the producer fixes a high price for his product. In other market
situations like oligopoly and monopolistic competition, the individual producers take
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the prices of the rival products in determining their price. If the primary determinant
of price changes in the competitive condition is the market place, the pricing policy
can least be categorized as competition based pricing.
5) Profit Factor in Pricing:
In fixing the price for products, the producers consider mainly the profit aspect.
Each producer has his aim of profit maximization. If the objective is profit
maximization, the critical rule is to select the price at which MR = MC. Generally, the
pricing policy is based on the goal of obtaining a reasonable profit. Most of the
businessmen want to hold the price at constant level. They do not desire frequent
price fluctuation.
The profit maximization approach to price setting is logical because it forces decision
makers to focus their attention on the changes in production, cost, revenue and profit
associated with any contemplated change in price. The price rigidity is the practice of
many producers. Rigidity does not mean inflexibility. It means that prices are stable
over a given period.
6) Government Policy in Pricing:
In market economy, the government generally does not interfere in the economic
decisions of the economy. It is only in planned economies, the government‘s
interference is very much. According to conventional economic theory, the buyers
and sellers only determine the price. In reality, certain other parties are also involved
in the pricing process. They are the competition and the government. The government
s practical regulatory price techniques are ceiling on prices, minimum prices and dual
pricing.
In a mixed economy like India, the government resorts to price control. The business
establishments have to adopt the government‘s price policies to control relative prices
to achieve certain targets, to prevent inflationary price rise and to prevent abnormal
increase in prices.
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Chapter 5: Pricing Strategies
5.1 New Product Pricing Strategies
Small companies can use a number of pricing strategies for new products. Some
business owners use a cost-plus method for pricing. They calculate production and
advertising costs then add a percentage to their unit costs. Other companies have a
specific return on investment in mind for new products. Whatever the case, business
owners must study the market and competition before setting a price for new products.
Demand
A company will usually study demand for industry products before setting a new
product price. Demand may be relatively elastic in the industry, meaning consumers are
sensitive to price changes. Therefore, the quantity that consumers demand will decrease
as prices increase. Contrarily, demand may be highly inelastic. Inelastic demand means
consumers are not overly concerned with price. Companies that produce highly technical
devices often experience inelastic demand. For example, a small cell phone company
may introduce a new type of cell phone. Certain consumers may desire the phone so
much that they are not concerned how much it costs.
Types
A company will often use a price skimming or penetration pricing strategy for
new products. Companies that use a price skimming strategy will typically set prices
relatively high versus competitive products. Contrariwise, companies that use a
penetration pricing strategy will usually price their new products lower than competitive
products. A company may also price its product commensurate with competitive
products.
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Benefits:
A business owner will use a price skimming strategy to quickly recoup product
and advertising costs. She may not have access to much business capital. Therefore, she
needs the money to produce more products and increase advertising expenditures. The
benefit of a penetration pricing strategy is that it can quickly increase market share,
according to Net MBA website. The business owner will deliberately price her products
low to achieve a high business volume. Subsequently, she will likely focus on producing
high quality products to keep those customers. Meeting competitive prices is just a safe
alternative. Consumers are already paying a certain price for existing products.
Function:
Most initial pricing strategies are temporary. A company cannot continue to keep
prices too low or high. The company will risk losing potential customers with high prices
and sacrifice profits with low prices. However, a business owner can continue to offer
occasional price reductions for new products. For example, some companies offer rebates
on new products, where customers will receive money at a future date.
Considerations:
The best way to know how to price new products is by asking consumers.
Companies often use focus groups and marketing research to determine prices for new
products. For example, managers of a small restaurant may interview 10 customers on
price in a focus group. Their objective may be to determine how much customers would
pay for a new breakfast item.
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5.2 Product-Mix Pricing Strategies
Product Line
Pricing
Product Bundle Optional Product

Pricing Pricing
By-Product Captive Product

Pricing Pricing
1) Product Line Pricing – Product Mix Pricing Strategies
Since firms usually develop product lines rather than single products, product line
pricing plays a decisive role in product mix pricing strategies. For example, when you
look at a car brand such as Audi, you will see a relation between the different series
and their prices. The entry model, the Audi A1, does cost you less than the top-range
car A8.
Thus, in product line pricing, the firm must determine the price steps between various
products in a product line based on cost differences between the products,
competitors‘ prices, and, most importantly, customer perceptions of the value of
different features.
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2) Optional Product Pricing – Product Mix Pricing Strategies
Optional product pricing is the pricing of optional or accessory products along with a
main product. In many cases, you can buy optional or accessory products along with
the main product. For instance, when you order your new Audi car, you may choose
to order a GPS system and an advanced Entertainment system. However, for the
company, pricing these options is not easy. They must decide carefully which items
to include in the base price and which to offer as options.
3) Captive Product Pricing – Product Mix Pricing Strategies
We speak of captive product pricing when companies make product that must be used
along with the main product. On the contrary, in optional product pricing, we should
think of products that can be bought/sold with the main product. Examples for captive
product pricing are razor blade cartridges and printer cartridges. Captive product
pricing is an extremely powerful strategy in the set of product mix pricing strategies.
Producers of the main products, e.g. printers and razors, often price them very low
and set high mark-ups on the supplies you need in order to operate the main products.
However, companies that use this type of product mix pricing must be very careful.
The difficulty is in finding the right balance between the main product and captive
product prices. Also, consumers trapped into buying expensive captive products could
resent the brand that ensnared them.
4) By-product Pricing – Product Mix Pricing Strategies
By-product pricing refers to setting a price for by-products to make the main
product‘s price more competitive. It is the result of the fact that producing products
and services often generates by-products. Often, these by-products (as singly sold
products) would not have any value and getting rid of them is costly. This would then
increase the price of the main product. But by using by-product pricing, the company
tries to find a market for these by-products to help offset the costs of disposing of
them and make the price of the main product more competitive.
In some cases, the by-products themselves can even turn out to be profitable – that is
actually turning trash into cash. Sly, isn‘t it?
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5) Product Bundle Pricing – Product Mix Pricing Strategies
The last one of the product mix pricing strategies is product bundle pricing. Using
product bundle pricing, companies combine several products and offer the bundle at a
reduced price. The best example is probably a menu at McDonald‘s: you get a bundle
consisting of a burger, fries and a soft drink at a reduced price. Also, companies such
as Sky, Telecom and other telecommunications companies offer TV, telephone and
high-speed internet connections as a bundle at a low combined price. For the
company, product bundle pricing is a very effective product mix pricing strategy: it
can promote the sales of products consumers might not otherwise buy. However, the
combined price must be low enough to get consumers to buy the bundle instead of a
selection of single products.
You see that setting the prices for a product becomes harder when it is part of a
product mix – because all products and their prices must be interrelated. But with
these product mix pricing strategies, you are on the right track.
5.3 Price Adjustment Strategies
Discount and
Allowance
International Segmented
Pricing Pricing
Dynamic Psychological
Pricing Pricing
Geographical Promotional
Pricing Pricing
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1) Discount and Allowance Pricing
The first one of the price adjustment strategies is applied in a large share of
businesses. Especially in B2B, this price adjustment strategy is rather common. Most
companies adjust their basic price to reward customers for certain responses, such as
the early payment of bills, volume purchases and off-season buying.
Discount and allowance pricing can take many forms: Discounts can be granted as a
cash discount, a price reduction to buyers who pay their bills promptly. Typical
payment terms look like this: ―2/10, net 30‖, meaning that payment is due within 30
days, but the buyer can deduct 2 per cent if the bill is paid within 10 days. Also, a
quantity discount can be given, which is a price reduction to buyers who buy large
volumes. A seasonal account is a third form of discount, being a price reduction to
buyers who buy merchandise or services out of season.
Allowances refer to another type of reduction from the list price. For instance, trade-
in allowances are price reductions given for turning in an old item when buying a new
one. Especially in the car industry, trade-in allowances are very common.
Promotional allowances refer to payments or price reductions to reward dealers for
participating in advertising and sales support programmes.
Segmented Pricing – Price Adjustment Strategies
Often, companies adjust their basic prices to allow for differences in customers,
products and locations. In short: adjusting prices to account for different segments. In
segmented pricing, the company thus sells a product or service at different prices in
different segments, even though the price-difference is not based on differences in
costs.
Several different forms of segmented pricing exist. Under customer-segment pricing,

different customers pay different prices for the same product or service. For instance,
museums and theatres may charge a lower admission for students and senior citizens.
Under product-form pricing, different versions of the product are priced differently,
although the difference is not due to cost differences. To give an example, look at a
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bottle of Evian mineral water. It may sell for €1 at the local supermarket. But if you
buy a 150ml aerosol can of Evian Brumisateur Water Spray, you will pay more than
€8 in beauty boutiques and spas. The content, though, is the same, only in a different
product form.
Under location-based pricing, a firm charges different prices for different locations,
although the cost of offering each location is the same. For instance, in the USA, state
universities charge higher tuition fees for out-of-state students, and theatres vary their
seat prices because of audience preferences for certain locations. Finally, under time-
based pricing, the firm varies its price by the season, the month, the day or even the
hour. This is commonly applied in the hotel business.
Of course, several conditions must be met for this price adjustment strategy to work.
The market must be segmental, and segments must show different degrees of demand.
In addition, the cost of segmenting and reaching the single parts of the market cannot
exceed the extra revenue obtained from the price differences created.
It is most important that segmented prices reflect real differences in customers‘

perceived value.
2) Psychological Pricing
Another one of the price adjustment strategies is psychological pricing. It refers to

pricing that considers the psychology of prices, not simply the economics. Indeed, the
price says something about the product.
For instance, many consumers use price to judge quality. A €100 bottle of perfume
may contain only €3 worth of scent, but people will be willing to pay the €100
because the high price indicates that the product is something special.
However, this does not work forever. When consumers can judge the quality of a
product by examining it or by calling on past experience with it, price is less used to
judge quality. But when they cannot judge quality, price becomes an important signal.
Just to give an example: who is the better lawyer? One who charges €50 per hour or
one who charges €500? It would need a lot of research and experience to answer this
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question objectively. Most of us would simply assume that the higher-priced lawyer
is the better one.
In fact, for most purchases, consumers simply do not have all the skill or information
they need to work out whether they are paying a good price. Often, time, ability or
inclination to research different brands or stores, compare prices and get the best
deals is lacking. Therefore, psychological pricing may be the most powerful one of
the price adjustment strategies.
3) Promotional Pricing
Promotion pricing calls for temporarily pricing products below the list price, and
sometimes even below cost, to increase short-run sales. Thus, companies try to create
buying excitement and urgency. Promotional pricing could take the form of discounts
from normal prices to increase sales and reduce inventories. Also, special-event
pricing in certain seasons to draw more customers could be used. Even low-interest
financing, longer warranties or free maintenance are parts of promotional pricing.
However, promotional pricing can have adverse effects. If it is used too frequently
and copied by competitors, price promotions can create customers who wait until
brands go on sale before buying them. Or the brand‘s value and credibility can be
reduced in the eyes of customers. The danger is in using price promotions as a quick
fix in difficult times instead of sweating through the difficult process of developing
effective longer-term strategies for building the brand. For that reason, price
adjustment strategies such as promotional pricing must be treated with care.
4) Geographical Pricing
The next one of the price adjustment strategies is geographical pricing. In

geographical pricing, the company sets prices for customers located in different parts
of the country or world. Should the company risk losing the business of more-distant
customers by charging them higher prices to cover the additional shipping costs? Or
should the same prices be charged regardless of location?
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There are five geographical pricing strategies:
a. FOB-origin pricing: goods are placed free on board a carrier, the customer thus pays
the freight from the factory to the destination. Price differences are the consequence.
b. Uniform-delivered pricing: the company charges the same price plus freight to all
customers, regardless of their location. Thus, there are no geographical price
differences.
c. Zone pricing: the company sets up two or more zones. All customer within a zone pay
the same total price, the more distant the zone, the higher the price.
d. Base-point pricing: the seller designates some city as a base point and charges all
customers the freight cost from that city to the customer. This can level the
geographical price differences if a central base-point is selected.
e. Freight-absorption pricing: the seller absorbs all or part of the freight charges to get
the desired business. Price differences are thus eliminated.
5) Dynamic Pricing
Dynamic pricing refers to adjusting prices continually to meet the characteristics and
needs of individual customers and situations. If you look back in history, prices were
normally set by negotiation between buyers and sellers. Thus, prices were adjusted to
the specific customer or situation. Exactly at that point, dynamic pricing starts.
Instead of using fixed prices, prices are adjusted on a day-by-day or even hour-by-
hour basis, taking many variables into account, such as current demand, inventories
and costs. In addition, consumers can negotiate prices at online auction sites such as
eBay.
As you can see, dynamic pricing is one of the price adjustment strategies that has
developed rapidly in recent years and becomes more and more common.
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6) International Pricing – Price Adjustment Strategies
The last one of the major price adjustment strategies is international pricing.
Companies that market their products internationally must decide what prices to
charge in the different countries in which they operate. The price that a company
should charge in a country can depend on many factors, involving economic
conditions, competitive situations, laws and regulations, and the development of the
wholesaling and retailing system. In addition, consumer perceptions and preferences
may vary from country to country, calling for differences in prices. Also, the
company might have different marketing objectives in different markets, which
require changes in pricing strategy.
Without doubt, costs play an important role in setting international prices. Higher
costs of selling in another country, which is the additional costs of operations, product
modifications, shipping and insurance, import tariffs and taxes, and even exchange-
rate fluctuations, may create a need to charge different markets in the various
markets.
After having investigated the 7 price adjustment strategies, it is clear that their
application depends on the specific situation the company is in. However, all of the
price adjustment strategies can also do harm and damage if executed in the wrong
way. Therefore, careful preparation, analysis and execution is an absolute
prerequisite. Only then, the price adjustment strategies will lead to a short- and long-
term increase in sales and continuous success.
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5.4 Price Change
A price change is the difference in the cost of an asset or security from one
period to another. While it can be computed for any length of time, the most commonly
cited price change in the financial media is the "daily price change", which is the change
in the price of a stock or security from the previous trading day's close to the current day's
close. Price change over a period of time such as year-to-date or past 12 months are also
commonly used time periods, and is generally computed as a percentage change.
BREAKING DOWN 'Price Change'
Percentage price change is generally the norm for computing asset performance.
For shorter intraday periods, absolute price change may be used by momentum and
algorithmic traders as the basis for trading and arbitrage strategies.
Page 48
Chapter 6: Pricing Decisions of Sunil’s Tutorial
6.1 Courses Offered
COURSES OFFERED
Bachelor of Management Studies F.Y.B.COM.

(Semester I – VI)
T.Y.B.COM S.Y.B.COM.
STD. XI – Commerce STD. XI – Commerce
STD. XII – Science STD. XII – Science
MH-CET MBA-CET
Page 49
6.2 Average Number of Students
Month 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
March 13 9 4 7 2 9 0 4 3 5
April 6 11 8 10 10 14 14 14 12 13
May 26 12 14 6 14 12 9 4 9 10
June 17 21 24 38 40 39 33 33 31 19
July 11 13 10 18 18 38 30 41 11 32
August 2 9 12 17 19 13 13 17 7 17
September 1 13 15 16 9 8 6 7 10 9
October 1 14 12 1 5 0 1 0 4 2
November 3 6 2 8 4 4 4 9 0 0
December 3 1 4 5 0 2 13 2 0 0
January 8 4 2 0 1 0 1 0 2 0
February 0 0 3 1 0 0 0 0 0 0
Total 91 113 110 127 122 139 144 131 89 107
Average 8 9 9 11 10 12 10 11 7 9
% - 24 -3 15 -4 14 -18 15 -32 20
Page 50
Month 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
March 16 3 5 19 14 2 6 12 0 0
April 15 7 17 22 22 31 26 48 26 32
May 12 21 11 7 16 10 21 29 24 17
June 16 18 33 11 23 36 37 52 53 41
July 14 26 38 73 49 52 51 41 69 36
August 16 20 20 23 37 45 28 21 22 19
September 2 8 19 23 16 15 21 13 14 12
October 1 10 3 3 3 6 4 0 0 6
November 0 8 21 7 11 19 0 18 10 10
December 4 4 2 2 9 8 24 0 2 2
January 0 4 2 2 17 10 11 3 14 19
February 0 1 1 0 7 7 7 0 3 26
Total 96 130 172 192 224 241 256 237 237 220
Average 8 11 14 16 19 20 20 20 20 18
% -10 35 32 12 17 8 -2 0 0 -7
Page 51
Page 52
6.3 Fixed Expenses
FIXED ASSET
CALCULATION
AIR CONDITIONER CHAIRS STATIONERY
Rs.25,000 /- Rs.8000/- Rs.1200/-
NOTE: A depreciation of 20% is calculated on all the Fixed Assets using ‘STRAIGHT LINE
METHOD’
VARIABLE EXPENSES
CALCULATION
BOOKS ELECTRICITY STATIONERY
Rs.6-8 Lakhs Rs.7000 pm Rs.3000 pm
PROSPECTUS MISC. EXPENSES
Rs.15/- per copy Eg. 12kg pm
300-400 copies Rs.300-400 per kg
Page 53
6.4 Internal Factors affecting Price
FIXED FACTORS
VARIABLE FACTORS
NUMBER OF HOURS REQUIRED PER SUBJECT
COST OF TUTORS
DIFFICULTY OF THE SUBJECT
Page 54
6.5 External Factors affecting Price
FACILITIES PROVIDED BY COMPETITORS
NUMBER OF HOURS OFFERED TO TEACH BY COMPETITORS
PROMOTIONAL STRATEGIES BY COMPETITORS
INFLATION
PRICE BY COMPETITORS
Page 55
Chapter 7: Price Determination

The following is the data for the records of Sunil‘s Tutorials from the year 1991-2015:
Page 56
Page 57
7.1 Cost Inflation Index
Page 58
7.2 Real Income with respect to Gold Price
Page 59
Chapter 8: Current Fee Structure
Bachelor in Management Studies
Semester I. Semester IV.
Finance Rs.4100 Tax Rs.5100
Statistics Rs.4100 Costing Rs.5100
Semester II. Semester V.
Math‘s Rs.5100 Management 1 Rs.5100
Costing Rs.5100 SSF Rs.5100
Economics Rs.5100 Semester VI.
Semester III. Intro Finance Rs.5100
Corporate Finance Rs.5100 OR Research Rs.5100
Management Account Rs.5100 Port Management Rs.5100
Page 60
STD. XI- Science STD.XII-Science
Physics - Rs.4700 Physics- Rs.1050

Chemistry- Rs.4000 Chemistry-Rs.1050
Math‘s- Rs.5400 Maths-Rs.1700
Biology- Rs.4000 Biology- Rs.1050
All Subjects- Rs.16300 All subjects- Rs.4300
Hindi- Rs.5000 pm Hindi- Rs.6000
STD. XI- Commerce

STD.XII – Commerce
Accounts- Rs.1150
Accounts- Rs.1150
Economics- Rs.900
Economics- Rs.900
O.C- Rs.4000
O.C- Rs.900
S.P- Rs.4000
S.P- Rs.900
Math‘s - Rs.1300 pm
Math‘s- Rs.1650
All Subjects- Rs.16000
All Subjects-Rs.3100
All Subjects (Math‘s)- Rs.21200
All Subjects (Math‘s)-Rs.3700
Hindi- Rs.5000
Hindi-Rs.6000 pa
F.Y.B.COM & S.Y.B.COM

MH-CET- Rs.19000
Accounts- Rs.4200
Economics-Rs.3700
MBA-CET-Rs. 19000
Math‘s- Rs.4750
All Subjects- Rs.10350
Page 61
Chapter 9: Conclusion
Unlike the other ingredients of the marketing mix, price generates revenue, so
arriving at the correct price is vital to the success of the business. However, there is no
one magic pricing strategy that will guarantee success, so a firm should be constantly
researching the market to identify a correct policy for its product or service.
One crucial factor to recognize at the end of this section is that firms may use
a combination of pricing strategies in response to changes in the market and the
marketing activities of competitors.
As a result, these case studies provide a fascinating outline of the key factors that go into
pricing decisions in the Tutorials market.
The right price today will rarely be the right price next year because there are so many
variables in the market such as:
Fixed Factors
Variable Factors
Competitors
Inflation
The successful organization needs to be alert to find out what these changes are. That is
why market research is so important to an organization like Sunil's Tutorial. Hence,
there's a need to update the latest information available about demographics, buying
patterns, changes in the availability and cost of land, the state of the economy and many
other variables.
The reason for calculating the previous Trend lines was to only calculate the changes in
price in the preceding and future years, number of students due to various factors.
Page 62
Chapter 10: Bibliography
1) Books of Accounts of Sunil‘s Tutorial
2) Sunil‘s Tutorial – Company Reports
3) Series of Internet Websites and Blogs:

a) Accounting Coach
b) Accounting Tools
c) Investopedia
d) Accounting Verse
e) Accounting for Management
f) Ready Ratios
g) My Accounting Course
h) Wikipedia
i) Slide Share
Page 63

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Pricing Decisions of Sunil‘s Tutorial

Chapter 1: Introduction and Research Methodology ................................................... 3

Chapter 2: Sunil’s Tutorial – Company Overview ........................................................ 7

Chapter 3: Introduction to Pricing ............................................................................... 11

Chapter 4: Pricing Decisions.......................................................................................... 20

Chapter 5: Pricing Strategies ......................................................................................... 38

5.3 Price Adjustment Strategies ........................................................................................ 42

Chapter 6: Pricing Decisions of Sunil’s Tutorial ......................................................... 49

Chapter 7: Price Determination .................................................................................... 56

Chapter 8: Current Fee Structure................................................................................. 60

Chapter 9: Conclusion .................................................................................................... 62

Chapter 10: Bibliography .............................................................................................. 63

Chapter 1: Introduction and Research Methodology

1.1 Project Overview

1.2 Research Methodology

1) To understand how to make Pricing Decisions

1.3 Limitations of the Project Overview

1) The information provided may not be completely reliable.

Chapter 2: Sunil’s Tutorial – Company Overview

2.1 History of Sunil’s Tutorial

Sunil‘s Tutorial is a private academic coaching program founded by Mrs. Sunita

Year Method of Promotion Cost

Rs.60 per thousand

Rs.1,20,000 for the

1995 Transport Services (Contessa Car and car.

Incorporation of Computers (3 HP Rs.45,000 each.

2.2 Objectives and Advantages

2.3 Unique Selling Proposition

1) Personal attention to Students as there are small batches.

2.4 The Road Ahead

With the increasing number of admissions there is an increase in space issues.

2.5 Features of Sunil’s Tutorial

1) Impart knowledge with understanding

2.6 Work Culture

To surpass client expectations consistently.

Integrity and Transparency:

To be ethical and sincere in all our transactions.

To be objective and transaction-oriented, and thereby earn trust and respect.

Chapter 3: Introduction to Pricing

Pricing is also a key variable in microeconomic price allocation theory. Pricing is a

PRICE = COST + PROFIT

3.1 Objectives of Pricing

1) To achieve the financial goals of the company (i.e. profitability)

3.2 Price Sensitivity

Elasticity of Demand is an indicator of the degree of responsiveness, or

What Influences price sensitivity?

Unique Low cost

3.3 Estimation of Cost

An approximation of the probable cost of a product, program, or project,

Four common types of cost estimates are:

1) Planning estimate: a rough approximation of cost within a reasonable range of

There are different ways of estimating cost:

3) Learning Curve - A learning curve is a concept that graphically depicts the

4) Activity-based costing (ABC) - Is a costing methodology that identifies activities in

5) Target costing - is an approach to determine a product's life-cycle cost which should

3.4 Determination of Price

Factors affecting Price Determination of a Product

5) Pricing Objectives: Another important factor, affecting the price of a product or

6) Marketing Methods Used: The various marketing methods such as distribution

Chapter 4: Pricing Decisions

Factors affecting Price Determination:

4.1 Importance of Pricing

4.2 Objectives of Pricing Decisions