“A pound of flesh is

what thee take shylock,

not an ounce more nor
a drop of blood…”
Portia, in
“The merchant of Venice”
“The value decade is upon
us… the best way to hold your
customers is to constantly figure
out how to give them what they
perceive more for what they
perceive less.”
Jack Welch
 Definitions…
 Value is the power of one product to
attract another in exchange. When
expressed in denominations of money, it
becomes price.
 Rent, fee, toll, donation , honorarium…
 Correlation with other variables of
marketing mix

 Promotion
 Place
 Product Quality
 Correlation with Quality

PRICE

High Med Low

Premium High Value Super high

High Stgy value stgy
stgy
PRODUCT Over Medium Good value
QUALITY Med charging value stgy stgy
stgy
Low Rip off stgy False Economy
economy stgy
stgy
 When fixing a price…
 Determine your price objective
 Know the importance of price to your tgt mkt
 Know the demand of your product
 Understand your costs
 Know your competitors
 Determine your pricing strategy
 Determine your price objective
 Income oriented objectives
 Target return on Investment
 Consider turnover vs. margins
 Profit maximisation (short Term strategy)
 Rent, life saving drugs
 Survival (short Term strategy)
 Sales oriented objectives
 Market share
 Reasonable pricing in spite of higher equity Coke
 Competition oriented objectives
 Avoiding competition
 Underprice for monopoly
 Meeting competition
 Match competition and then follow up with strong mkt mix variables
coffee
 Stabalizing competition
 Promote state of equlibrium petrol, vegetables
 Know the importance of price to
your tgt mkt

 Who are our customers and what do they

want our price to be?
 Some times higher price sells
Know the demand of your product
 Price elasticity
 Big change in price does not bring equivalent
or any change in demand
 bread, insulin
 Small or no change in price brings big change
in demand
 Pastry, agro perishables
 Cross elasticity
 Understand your costs
 Fixed
 Variable
 ABC costing
 pbc
 Target costing
 the Japanese reverse calculation
 Pricing strategies
 Differential pricing strategies
 Competitive pricing strategies
 Product line pricing strategies
 Psychological pricing strategies
 Distribution based pricing strategies
 Differential pricing strategies
 One price policy
 Variable pricing
 Real estate, auction houses, internet
 Second market discounting
 Museums, rai l- air fares, fun republic morning shows
 Skimming
 DVD, cars
 Periodic discounting
 Offseason, bandhej, rakshabandhan sales
 Random discounting
 Value pricing – walmart EDLP
 Competitive Pricing Strategies
 Meet the competition
 Undercut the competition
 Price leadership / follow the leader
 mkt share unaffected
 Penetration pricing
 When demand is very sensitive to price
 Substantial economies of scale
 Threat of strong imitation
 Mass market concept
 May lead to predatory pricing
 Reliance, big bazaar
 Traditional pricing
 Local phone, candies etc
 Product line pricing strategy
Mximise profits for the entire pdt line – total profit pricing rather than item profit
pricing
 Captive pricing
 Basic pdt cost low, high mark up on supplies
 Cameras
 Gillette
 Sony playstation software– CD based play station console
 Loss leader strategy
 Main offering low priced to enhance traffic
 Discount stores, canmart
 Bait and switch pricing
 Product line pricing strategy
 Price lining
 Price points - simplifies decision making for
custmer and retailer
 Bata

 Price bundling
 Package cheaper than individuals
 Microsoftoffice ’97- access, explorer, word,
p.point, excel
 Product line pricing strategy
 Two part pricing
 A fixed price plus a variable fee
 Telephone, electricity, joy rides in esselworld.
 Optional feature pricing
 Cars, pizzahut
 By product pricing
 Plasma for vaccines, plastic scrap at core
 Psychological Pricing
Plays on consumers perceptions and image that the price may build
 Reference pricing
 Catalog, home shopping netwrks, shelf spaces
 Odd versus even price
 Bata, medicines
 Prestige pricing
 Infant care pdts, Perfumes, shopping products, cars
 Low interst finance pricing
 EMIs as reference
Distribution based pricing strategies
 Channel price
 Coke at fancy restaurant
 Location Pricing
 Seats in a an aircraft, theatre, movie hall
 Responding To competitors price
changes
 No change in price or value offered
 No change in price, enhance offering,
augmentation
 Change the price , keep offering same
 Change the price and also change offering
and quality
 Introduce new line in new category.
 You increase prices…
Incremental or radical ?
 Delayed quotation pricing
 Construction projects, customised jewellery, dresses
 Escalator clauses
 Floating interest rates
 Unbundling
 Charge for augmentation
 Withdrawal of discounts
 Without raising prices …
 Reduce the quantum of offering
 Maggi
 Substitute less expensive raw material
 Paperbacks, Lifebuoy
 Use less expensive packaging material
 refill packs
 Reduce the no. of sizes in product line
 Create new economy brands