PRICING STRATEGY

 What is pricing?

Pricing is one of the most important element of marketing

mix, as it is the only mix which generates a turnover for an
organization.

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 TYPES OF PRICING STRATEGY

Penetration Pricing

The organization sets a low price to increase sales and

market share. Once market share has been captured the
firm may well then increase their price. Gormay

 Skimming Pricing

The organization sets an initial high price and then slowly

lowers the price to make the product available to a wider
market. brands

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 TYPES OF PRICING STRATEGY

Competition Pricing

Setting a price in comparison with competitors. Really a

firm has three options and these are to price lower, price
the same or price higher. FMCGs etc.

 Product Line Pricing

Pricing different products within the same product range at

different price point.
or
Setting price of multiple products that company offers in
coordination with other products. One product price affects
the others. E.g I pad

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 TYPES OF PRICING STRATEGY

 Bundle Pricing

The organization bundles a group of products at a reduced

price. Common methods are buy one and get one free
promotions.

 Psychological Pricing

The seller here will consider the psychology of price and

positioning of price within the market place. Bata 1999 Rs.

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 TYPES OF PRICING STRATEGY

Premium Pricing

The price set is high to reflect the exclusiveness of the

product.

 Optional Pricing

The organization sells optional extras along with the

product to maximize its turnover.

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 TYPES OF PRICING STRATEGY

Cost Plus Pricing

Here the firm add a percentage to costs as profit margin to

come to their final pricing decision.

 Promotional Pricing

The organization sets the low prices for a short period of

time. Seasonal offers at stores

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 TYPES OF PRICING STRATEGY

 Geographical Pricing

Geographical pricing sees variations in price in different

parts of the world or in a country.

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 STARATEGIC ROLE OF PRICE

Price in the positioning strategy

Strategic choices about market targets, products and

distribution set guidelines for both price and promotion
strategies. Product quality and features, type of distribution
channel end users served and the functions of
intermediaries all help to establish a feasible rice range.
1. Product Strategy
It depend on the quality of product higher quality higher
price and lower quality lower price
2. Distribution Strategy
The needs and motivation of intermediaries need to be
considered in setting price.

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 STARATEGIC ROLE OF PRICE

Pricing Situations

Pricing strategy requires continuous monitoring because of

changing external conditions, the action of competitors and
the opportunities to gain a competitive edge through
pricing actions.

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 STARATEGIC ROLE OF PRICE

Use of Price in Positioning Strategy

Price is used in various ways in the marketing program

positioning strategy such as:

1. Signal to the Buyer

Price offers an immediate means of communicating with

the buyer. The price is visible to the buyer and provides a
basis of comparison between brands.
2. Instrument of competition
Price offer a way to quickly attack competitors or,
alternatively to position a firm away from direct
competition.

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 STARATEGIC ROLE OF PRICE

3. Improving Financial Performance

Price and cost determine financial performance price

strategies need to be assessed for their estimated impact on
the firm s financial statements, both in the short and long
run.
4. Marketing Mix Considerations
Price may serve as a substitute for selling effort,
advertising, and product quality. Management evaluate
competitor positioning and buyer reaction during setting
price.

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 STARATEGIC ROLE OF PRICE

• Pricing Objectives

Management use the pricing strategies to achieve one or

more objectives such as:

1. Gain market position

Low price may be used to gain sales and market share.

Limitation include the encouragement of price wars and
reduction of profit contributions.
2. Achieve Financial Performance
Prices are selected to contribute to financial objectives such
as profit contribution and cash flow.

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 STARATEGIC ROLE OF PRICE

• Pricing Objectives
3. Product Positioning
Prices may be used to enhance product image, promote the
use of the product, create awareness and satisfy other
positioning objectives.
4. Stimulate Demand
Price is used to encourage buyers to try a new product or to
purchase existing brands during periods when sales slow
down.
5. Influence Competition
The objective pricing actions may be to influence existing
or potential competitors.

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