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Factors to be considered when setting up prices Pricing Procedure Pricing Strategies New Product Pricing Strategies Product Mix

Pricing Strategies Price Adjustment Strategies Price Changes Public Policy and Pricing.

PRICING
Amount of money charged for a product / service. Sum of all values that customers pay in order to gain the benefits of having / using a product / service.

Pricing is the only element in the marketing mix that is a revenue generator.

Factors to be considered when setting up prices


Customer Perceptions of value Company and Product Costs Stage of Product in Product Life Cycle Overall marketing Strategy, Objectives and Mix Extent of Differentiation The market and Demand Competition Economic Conditions Government intervention / regulations

Pricing Procedure
identify target customer segments and draw up their

profiles. Decide the market position and the price image that the firm desires for the brand. determine the extent of price elasticity of demand of the product. take into account the life-cycle stage of the product. Analyze competition and other environmental factors. choose the pricing method to be adopted. select the final price. review the pricing periodically.

Pricing Strategies
New Product Pricing Strategies
Product Mix Pricing Strategies Price Adjustment Strategies

New Product Pricing Strategies


Market Skimming Pricing
The practice of price skimming involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market.

The objective with skimming is to skim off customers who are willing to pay more to have the product sooner.
The main objective of employing a price-skimming strategy is to benefit from high short-term profits.

New Product Pricing Strategies


Market Penetration Pricing Setting a low price for a new product in order to attract a large number of buyers and a large market share.
Works in a market that is highly price sensitive. Low price (Penetration price) has to be maintained .

Product Mix Pricing Strategies


Product Line Pricing Optional Product pricing Captive Product Pricing Product bundle pricing

Price Adjustment Strategies


Discount and Allowance Pricing
Adjusting Basic Price to Reward Customers For Certain Responses
Cash Discount Quantity Discount Functional Discount Seasonal Discount Trade-In Allowance Promotional Allowance

Segmented Pricing Customer segment pricing Product Form Pricing Location Pricing Time Pricing

Price Adjustment Strategies


Psychological Pricing

Considers the psychology of prices.

Customers use price less when they can judge quality of a product.
Price becomes an important quality signal when customers cant judge quality; price is used to say something about a product.

Special-Event Pricing Cash Rebates Low-Interest Financing Longer Warranties Free Maintenance Discounts

Temporarily Pricing Products Below List Price Through:

Price Adjustment Strategies


Geographical Pricing FOB Pricing. Uniformed Delivered Pricing. Zone Pricing. Basing Point Pricing. Freight Absorption Pricing. International Pricing

Price Changes
Price Cuts
Excess Capacity Falling Market Share Dominate Market Through Lower Costs

Price Increases Cost Inflation Over demand:


Customers Needs

Company

Cant

Supply

All

Assessing/Responding to Competitors Price Changes


Has Competitor Cut Price Yes Will Lower Price negatively affect market share and profits Yes Can / Should effective action be taken? No No No Hold Current Price; Monitor Competition

Reduce Price

Yes

Raise Perceived Quality Improve Quality and Increase Price Launch Low Price Brand

Public Policy and Pricing


MRTP Act, 1969

Competition Act, 2002 Ant-Competitive Agreements


Horizontal Agreements Vertical Agreements

Abuse of Dominance
Unfair Trade Practices