MARKETING MANAGEMENT

14th edition
14
Developing Pricing
Strategies
PRICING…
Price

To
To the
the seller...
seller... To
To the
the consumer...
consumer...
Price
Price is
is revenue
revenue Price
Price is
is what
what you
you give
give
and
and profit
profit source
source up
up to
to get
get what
what you
you want
want

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PRICING…

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.

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 New Product Pricing Strategies
Pricing Strategies
Market Skimming Pricing is a strategy with high
initial prices to “skim” revenue layers from
the market.
- Example: Sony - Bravia, LCD, LED, Nokia N, &
E series; very high price for their new products.
- 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.
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New Product Pricing Strategies
Pricing Strategies
Market Skimming Pricing

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 New Product Pricing Strategies
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.
- Example: Banglalink, Airtel telecom etc; their 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

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New Product Pricing Strategies
Pricing Strategies
Market Penetration Pricing

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Product Mix Pricing Strategies
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.
E. g. Nokia charges differently for their different
models of cellular mobile set, Grameen Phone charges
different prices for different category of SIM cards.
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Product Mix Pricing Strategies
Pricing Strategies
Product Line Pricing

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Product Mix Pricing Strategies
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.
E. g. Ice maker with refrigerator, special
sound system (home theatre) with Television
or Personal computer.
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Product Mix Pricing Strategies
Pricing Strategies
Optional Product Pricing

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Product Mix Pricing Strategies
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.
E. g. Replacement blade cartridge of Gillette
razors, printer cartridge of Lexmark, HP, Epson,
etc.

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Product Mix Pricing Strategies
Pricing Strategies
Captive Product Pricing

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Product Mix Pricing Strategies
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.
E. g. Cut pieces of ready made garments and
wastes papers of publisher houses.
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Product Mix Pricing Strategies

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.
E. g. Telephone and electricity providers
charge such types of price to their customers.
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Product Mix Pricing Strategies
Pricing Strategies
Two-Part Pricing

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Product Mix Pricing Strategies
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.
E. g. Bundle price for tours package and set
menu of fast-food and restaurants.
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Product Mix Pricing Strategies
Product Bundle Pricing

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Product Mix Pricing Strategies
Product Bundle Pricing

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Product Mix Pricing Strategies
Product Bundle Pricing

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Product Mix Pricing Strategies
Pricing Strategies
Psychological Pricing refers setting the price of
products in a way that can convince the buyer
by psychological or emotional impact.

E. g. 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.

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Product Mix Pricing Strategies
Psychological Pricing

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END of CHAPTER - 14