MARKETING MANAGEMENT

Setting Pricing
Strategies
Chapter # 14

Hamidul Islam [Hamid]

Senior Assistant Professor, Department of Marketing
Faculty of Business Administration, AIUB
PRICING…

PRICE

To the To the Seller...

Consumer... Price is Revenue
Price is what you and the Profit
give Earning Source
up to get what you
want
What is Price?
Price is the amount of money charged for a
product or service. It is the sum of all the
values that consumers give up in order to
gain the benefits of having or using a product
or service.

- Price is the only element in the marketing

mix that produces revenue; all other
elements represent costs.
NEW PRODUCT PRICING
STRATEGIES
Market Skimming Pricing is a strategy with high
initial prices to “skim” revenue layers from the
market.
For Example: Sony Bravia Smart TV, Apple’s iphone, BMW’s
new series cars --- charge very high price for their new
products launched in the market.

Characteristics for charging Skimming Price

 Product quality and image must support the price.
 Buyers must want (Demand) the product at the price.
 Competitors should not be able to enter the market easily.
NEW PRODUCT PRICING
STRATEGIES
Market Skimming Pricing

Apple’s iphone 11 pro

NEW PRODUCT PRICING
STRATEGIES
Market Penetration Pricing sets a low initial price in
order to penetrate the market quickly and deeply to attract
a large number of buyers quickly to gain market share.
For Example: Banglalink, Airtel telecom charge lower price for introduction.

Characteristics for charging Penetration Price

 Price sensitive market.
 Inverse relationship of production and distribution cost to sales
growth.
 Low prices must keep competition out of the market
NEW PRODUCT PRICING
STRATEGIES
Market Penetration Pricing
PRODUCT MIX PRICING
STRATEGIES
Product Line Pricing refers setting the price steps between
various products in a product line based on cost differences
between the products, customer evaluation of different
features and competitors’ price.

To target different segments of customer; company offer several

products with quality variation from a specific product line and
charge different ranges of price.

For Example: Samsung charges differently for their different

models of cellular mobile set, Grameenphone charges different
prices for different category of SIM cards.
PRODUCT MIX PRICING
STRATEGIES
Product Line Pricing
PRODUCT MIX PRICING
STRATEGIES
Optional Product Pricing involves pricing of optional or
accessory products that are sold with the main product
(Segmented pricing).
Company offer different additional items with the principal
products to add more value to it. But customer can buy with these
additional product or simply the main product.
For example: Home Theatre Sound System with Smart
Television, Voltage Stabilizer with Refrigerator.
PRODUCT MIX PRICING
STRATEGIES
Optional Product Pricing
PRODUCT MIX PRICING
STRATEGIES
Captive Product Pricing involves pricing of products
that must be used along with the main product.
Sometimes companies sells the main product at a
lower cost and but make money by selling the
additional logistics.
For Example: Replacement blade cartridge of Gillette razors,
printer cartridge of Lexmark, HP, Epson, etc.
PRODUCT MIX PRICING
STRATEGIES
Captive Product Pricing
PRODUCT MIX PRICING
STRATEGIES
By-product Pricing refers pricing of products with
little or no value to the manufacturer those are
produced as a result of producing the main product.
This is an additional income for the company. So,
producers will seek little or no profit other than the cost
to cover storage and delivery.
For example: Cut pieces of readymade garments and
wastes papers of publisher houses.
PRODUCT MIX PRICING
STRATEGIES
By-Product Pricing
PRODUCT MIX PRICING
STRATEGIES
Two-part Pricing refers pricing of the products keeping two
parts in the price. It consists of a fixed cost plus a variable
usage fee.
- The fixed fee should be low enough to encourage purchase of
the product and the profit can be made on the usage fees.
For example: Restaurants, Telephone and electricity providers
charge such types of price to their customers.
PRODUCT MIX PRICING
STRATEGIES
Product Bundle Pricing refers combining several
products and offering the bundle at a reduced price
than their individual list prices.
Bundle pricing increase the profit of the organization
through large volume of sales and the customers are
also getting reduced price.
For example: Bundle price for tours package and set
menu of fast-food and restaurants.
PRODUCT MIX PRICING
STRATEGIES
Product Bundle Pricing
PRODUCT MIX PRICING
STRATEGIES
Psychological Pricing refers setting the price of products in a
way that can convince the buyer by psychological or emotional impact

For example: By using odd-even pricing (Tk: 999

instead of Tk: 1000), or Down payment and Installment
based pricing (5000+), shortening the price of products
(Tk: ‘24’ instead of Tk: ‘24.00’) and offering special
promotion price etc.
PRODUCT MIX PRICING
STRATEGIES
Psychological Pricing
END OF THE
CHAPTER…