PRICING POLICIES

Price means the
money value of a product
or service expressed in
terms of peso and/ or
centavos.
 PRICING
OBJECTIVES
1. Profit-oriented objectives
There are two types of profit-oriented objectives:
a. Target return - objectives set a specific level of profit
as an objective.
b. Profit maximization - objectives seek to get as much
profit as possible.
2. Sales-oriented objectives
These seek higher level of sales volume, peso sales, or
market share without primary reference to profit.

Volume increase is measured against a company's

own sales across specific time periods. A company's
market share measures its sales against the sales of
other companies in the industry.
3. Status Quo Objectives
It is one that maintains current price levels or meets
the price levels of the competition.

While status quo pricing ensures competition, it's still

ultimately a better strategy than engaging in a price
war.
PRICING
POLICIES
 Psychological Pricing Policies
1. Fixed price policy – In-store retailers adopt a one-price system where
goods are sold to customers at the same price.

2. Variable price policy -  price paid for a certain item is determined by

the buyer's bargain power.

3. Odd-price policy -  price are set at odd amount.

1. Free-on-Board (FOB) Point of
Production Pricing or Factory Point
When the seller quotes the price at FOB factory, the buyer is
responsible for paying  the cost of transportation. Title to products and
risks are transferred to the buyer at the time of loading the goods at
the shipper's dock or carrier's place.

Under the FOB factory price policy, the seller charges the same
amount of the similar products of the same quantity and
quality irrespective of the distance or nearness of the buyer's business.
2. Freight Equalization or Postage
Stamp Pricing
The seller includes the FOB price to the overall
cost. Seller quote a price which includes delivery
cost that is given regardless of the buyer’s
location. Seller receives net profit on each sale
depending on the amount of his or her shipping
costs.
3. Zone Pricing

This is the pricing policy used in postal services and

long-distance telephone services. Zone lines for the
total market must be carefully drawn to avoid
discrimination among buyers.

Although delivered prices may vary from one zone to

another within a zone, all customers pay the same price.
 PRICING
METHODS
 COST – BASED PRICING
There are two cost based pricing methods:
1.Cost-Plus Pricing – This is the simplest pricing method
wherein a standard markup is added on the cost of the
product.
2.Breakeven Pricing – This is also known as target profit
pricing, wherein the organization tries to determine the
price at which it will break even or achieve its target profit.
 VALUE – BASED PRICING
Also known as buyers-based approach which considers
consumer’s perceived value of the product. Value pricing is
offering just the right combination of quality and good service
at a fair price.
 COMPETITION – BASED PRICING
There are two types:
1. Going-rate Pricing - The company places less attention on its own
costs or demand. This approach charges the same price with that of
major competitors. Some firms follow the leader’s price, and feel that
holding to the ongoing price will minimize price wars.

2. Sealed-bid Pricing - This sets prices based on how the marketer

thinks that other competitors will price, irrespective of costs or
demand, when it bids for jobs. In short, the higher the marketer sets
its price above costs, the lesser is the chance of getting the contract
 What is the
relationship between
revenues and price
elasticity demand?
Total Revenue and Elasticity of Demand

Legends:
Qd Quantity demand
P Price
Q Quantity