Welcome

Pricing Strategy
Chapter-11
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Strategic Role of • Price in the Positioning Strategy

Price  Product Strategy
 Distribution Strategy
• Pricing Situations
• Role of Pricing
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Role of Pricing

Signal to the
Buyer

A Substitute for Marketing Instrument of

Program Functions Competition
(Promotional Pricing)

Improving Financial
Performance
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PRICING STRATEGY
Set Pricing
Objectives

Analyze the
Pricing Situation

Select Pricing
Strategy

Determine Specific
Prices and Policies

Fig: Steps in selecting a pricing strategy

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Pricing Objectives  Specific pricing objectives

 Gain market position
 Achieve financial performance
 Product positioning (image, use, awareness)
 Stimulate demand
 Influence competition
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Analyzing The Pricing Situation
Customer Price Sensitivity

Pricing Analyzing the Pricing

Objectives Situation Product Costs

Competitors’ Likely
Responses
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Selecting the Pricing

Strategy  Determine the extent of pricing flexibility
 Decide how to position price relative to costs and how
visible to make the price of the product
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How Much Flexibility Exists?
Demand

Pricing
Competition Demand-Cost Gap
Objectives

Costs

Determinants of Pricing Flexibility

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Price Positioning and Visibility
Above
Competition Skim strategy
o Two key decisions

How far above cost to price a new product?

Neutral
strategy How visible price to make in the promotion of the new
(same as product?
competition)

Penetration
Below strategy
Competition
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Illustrative Price Strategies
Active
strategy

Low- High-
active active
Low strategy strategy
High
relative relative
price Low- High- price
passive passive
strategy strategy

Passive
strategy
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• Price determination is usually based on cost, demand, competition or a mix of

these
Determining  Cost-oriented methods use the cost of producing and marketing the

Specific Prices product as the basis of price

 Demand-oriented methods consider estimated market response to
alternative prices
 Competition-oriented methods use competitors’ prices as a reference
point in setting price
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 Special pricing situations:

Pricing  Price Segmentation (appeal to different markets)

Management  Value Chain Pricing (cost at different value chain)

 Price Flexibility (fixed or negotiated)

 Product Life Cycle Pricing (varying price of PLC)

 Counterfeit Products
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• Price fixing (a conspiracy among firms to set price)

Legal & Ethical • Price discrimination
Considerations • Deceptive pricing
• Predatory pricing
 Although subjective, these issues should be evaluated
Thank You!
Any Questions?