Managing Pricing

Lecture Outline

• Process of setting product price

• Pricing Strategies
 Setting Product Price
• Select the pricing objective
• Determining demand
• Estimating costs
• Analyzing competitors costs & prices
• Select pricing method
• Selecting the final price
 Pricing Objectives
• Survival
• Internet, Telecom
• Maximum market share: Tesco
• Maximum market skimming: An approach
under which a producer sets a high price for a new
product. Its objective is to obtain maximum revenue from
the market before substitutes products appear .
• Sony PS
• Product Quality Leadership: is where a
company aims to provide the best quality product in the
market, and therefore charges more than its
competitors . Starbucks
 Determining Demand
• Elasticity of demand

P1
P2 P1
P2

Q1 Q2 Q1 Q2

In-elastic Demand Elastic Demand

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 Basic pricing methods
• Markup price= cost plus markup
• Target return pricing  money invested plus the profit that the
investor wants to see in return

• Perceived value pricing: how much consumers are willing to

pay for it, rather than upon its production and delivery costs (Chinese LCD Player)

• Value pricing: prices are based mostly on a consumers'

perceived value of the product or service.(Tesco)

• Going-rate pricing: Setting a price using the prevailing

market price as a basis. (Internet, Pepsi, Coke)
• Auction type pricing: customers buy or sell product or
services through using internet.(EBay) olx

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Markup Pricing

Mark-Up
TOTAL COST

Unit Cost
PRICING STRATEGIES
 Pricing Strategies
• Skimming
• Penetration
• Promotional Pricing
• Product Mix Pricing
• Differentiated Pricing
 Promotional Pricing
• Loss leader pricing
• Special Event Pricing
• Cash Rebates
• Low Interest Financing
• Longer Payment Terms
• Warranties and service contracts
• Psychological discounting
International Scholarships
• The University of Glamorgan has the following scholarships
for international students. You will be automatically
considered for one of these awards when we receive your
application. You do not need to make a separate application
and confirmation of scholarship will be included in your offer
letter.

• Undergraduate degree Courses – £1,500 per year

Postgraduate degree courses – £2,000
Master of Business Administration (MBA) – £1,500
Promotional Pricing

•Longer payment terms

•Cash rebates
Promotional Pricing

•Special event pricing

•Longer payment terms
•Warranties & service contracts
1. Pay a small deposit and your balance by cash, cheque or card just before
delivery

2. Buy today with or without a deposit and pay your balance in 12 months time

3. Buy today and take up to 4 years free to pay with no charges and interest
•Longer payment terms
•Warranties & service contracts
•Low-interest financing
•Longer payment terms
•Warranties & service contracts
•Low-interest financing
•Psychological discounting
 Numbers Game
• Consumers tend to process price in a “left-
to-right” manner.
– $2.99 & $3.00
• $2.99 will usually be considered a price
over $2.00 rather than price below $3.00
• Number “9” conveys the notion of
discounts.
• Even digits communicates high quality.
 Product Mix Pricing
• Product line pricing
 Product Mix Pricing
• Optional Feature Pricing
 Product Mix Pricing
• Captive Product Pricing
 Product Mix Pricing
• Two-part Pricing
• Fixed Price
• Variable Usage Fee
 Product Mix Pricing
• Product-Bundling Pricing
 Differentiated Pricing
• Customer Segment Pricing (Airlines, Cinemas, Banks)
• Product Form Pricing (Pepsi, Coco Cola)
• Image Pricing (Intel Celeron, Intel Original)
• Channel Pricing (Pepsi in a restaurant vs Pepsi from vending machines)
• Location Pricing (Cinema, Stadium, Theatres)
• Time Pricing (Airlines, Telecom companies)
PRICING