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Pricing Strategies

Presented by

JYOTI SINGH (D-38) RITOBAN SEN (D-54)

DIGVIJAY SINGH (D-30) GAGAN MANDAVKAR (D-31)
GAURAV SINGH (D-32)
Pricing Strategy 2

Survival

Pricing Maximum
Current
 Value of a product or service Profits
 Based on customer satisfaction
 Maximize return on investment- ROI Maximum
 To target consumers Market
Share

Pricing objectives
Pricing Strategies 3

 Pricing strategy is the tactic that company use to increase sales and
maximize profits by selling their goods and services for appropriate
prices.
 Only element of marketing mix that helps in generating income.
 Major Types
 Customer value-based Pricing
 Cost-based Pricing
 Competition-based Pricing
Premium Pricing 4

 Establishing Higher Price than its competitors for premium position in

the market
 Want consumers to believe that the brand name by itself is enough.
 A premium price tag can help enhance your brand identity and
enhances the quality of the product

Penetration Pricing
 Used for capturing market share by deliberating setting up prices at
a lower level compared to its rivals.
 Main target Group is price-sensitive consumers.
 Such strategy is generally used by new entrants into the market.
Economy Pricing 5

 Very low-cost Approach

 Used in the retail food business for groceries where marketing and
production costs have been kept to a minimum
 Selling a similar item at a lower price can help your market rivals and
gain a robust competitive edge

Skimming Pricing
 Involves setting a high price on a low quality product, with the aim of
generating as much revenue.
 Often used in markets that have a high level of new product launches,
and where novelty is important
 Skimming encourages the entry of competitors. When other firms see
through margins available in the industry, they will quickly enter.
Psychological pricing 6
 CHARM PRICING :It typically end in “99” or “95”. The
“charm” is not just in the 9s or the 5s in the price tag, but
also in the left-most digit in the price.
 PRESTIGE PRICING : Sets higher than average prices to
suggest status and high quality to your customers.

Captive Product Pricing

 Is setting a price for product that must be used along with the
main product such as a razor or a film for a camera.
 Manufactures of the main products often sets them low and
sets high markups on the supplies.

Optional Product Pricing

 It takes into account optional or accessory products along with the
main product.
How to price a product for selling: 7

Material cost Labour cost Overhead

$20 $10 $8
 cost-based pricing: determines the
selling price of the product.
Total Cost
 Price of product is determined by adding a
$ 38 profit (%) in addition to cost of making a
product.
Mark-Up %
50%
Explaination after total cost
 Add: markup percentage, let’s say 50%
(retail industry standard
Selling Price  final product price of $57.00 ($38 x 1.50).
$ 38* 1.50 =
$57  “Charm Pricing” tactic from the beginning,
you might mark this product at $57.99.
Pricing Strategy For The Monopolist 8

 WHAT IS A MONOPOLIST?

 MAXIMIZE PROFIT

 LINEAR PRICING (ONE PRICE FOR ALL UNITS SOLD)

 MARGINAL REVENUE:ADDITIONAL REVENUE GENERATED

 MARGINAL COST:COST ADDED BY PRODUCING ADDITIONAL UNIT

 Pricing Strategies for the Monopolist

9
P MC
Y AREA (P*AC*CB)=PROFIT
AREA (YP*B)=CONSUMER
SURPLUS
AC AREA (BAX)=DEADWEIGHT
LOSS
P* B
X

AC* C

Q* Q
MR
Price Elasticity of Demand 10
 Price elasticity is the measurement of
how quantity demanded of a good will
be affected by changes in its price.
C
 McKinsey & Co. studied the Global
1200 and found that if they raised
prices by just 1% — and demand
remains constant — profits would go up
on average by 11%, for instance
 There are 5 types of elasticity of
demand
Pricing strategies are dynamic 11

 The price of same product will vary according to the place

 The price will vary according to the demand(urgency factor)

 Example: Surge charges of Ola, Uber, fare of airlines,zomato e.t.c

References 12
 https://hbr.org/2012/07/use-pricing-strategy-to-boost
 https://www.marketing91.com/marketing-mix-kelloggs/
 https://www.priceintelligently.com/blog/bid/184451/how-starbucks-
uses-pricing-strategy-for-profit-maximization
 http://www.economicsdiscussion.net/price/factors-affecting-the-
pricing-decisions/3833
 http://econpage.com/201/handouts/pricing/index.html
 https://wholesalesuiteplugin.com/different-types-pricing-strategies-
can-use-wholesale-marketing/
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“Pricing is actually pretty
simple…Customers will not pay
literally a penny more than the
true value of the product.” - Ron Jhonson

Thank-you