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Price

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  • 1. PROF JAYASHREE VISPUTE
  • 2. Price  The only marketing mix element that produces revenue  Most flexible element of marketing mix  Charging too much chases away potential customers, charging too little cuts revenue  Price is dynamic because of environmental influences  Price is the amount of money charged for a good or service
  • 3. Internal Factors Pricing Decisions External Factors Factors to consider when setting prices
  • 4. INTERNAL FACTORS  Marketing objectives of the firm  The image sought by the firm through pricing  The characteristics of the product  The stage of the product in the life cycle  Cost of manufacturing and marketing  Extend of differentiation and distinctiveness of the product  Other elements of the product mix
  • 5. External Factors  Market chracteristics – demand, customers, competition  Price elasticity of demand of the product  Competitors pricing strategies  Government controls/regulations on the price  Relevant legal aspects  Societal views
  • 6. Marketing Objectives Marketing-Mix Strategy Costs Organizational Considerations Internal Factors Affecting Pricing Decisions
  • 7. Nature of Market And Demand Competition Government Policies Other: Economy, Resellers etc. External Factors Affecting Pricing Decisions
  • 8. Marketing Objectives Survival Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business. Current Profit Maximization Choose the Price that Produces the Maximum Current Profit, Cash Flow or ROI. Market Share Leadership Low as Possible Prices to Become the Market Share Leader. Survival Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business. Product Quality Leadership High Prices to Cover Higher Quality Marketing Objectives that Affect Pricing Decisions
  • 9. Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials Types of Cost Factors that Effect Pricing Decisions
  • 10. Marketing-Mix Strategy Product Design Distribution Promotion Non-Price Factors Companies Will Consider Price Along With All the Other Marketing-Mix Elements When Developing the Marketing Program. Price Must be Coordinated With: Marketing Mix Variables that Affect Pricing Decisions
  • 11. Costs set lower limits Market and demand set upper limits Marketers must understand the relationship between price and demand for a product Market and Demand Factors that Affect Pricing Decisions
  • 12. Who sets prices Organizational Considerations That Effect Pricing Decisions
  • 13. Costs set lower limits Market and demand set upper limits Marketers must understand the relationship between price and demand for a product Market and Demand Factors that Affect Pricing Decisions
  • 14. Price Quantity Demanded per Period A. Inelastic Demand - Demand Hardly Changes With a Small Change in Price. P2 P1 Q1Q2 Price Quantity Demanded per Period P’2 P’1 Q1Q2 B. Elastic Demand - Demand Changes Greatly With a Small Change in Price. Price Elasticity of Demand
  • 15. Competitors’ prices and their possible reactions need to be considered when setting prices Competition
  • 16. Pricing Objectives A firm may choose any of the following: 1. Maximize current profits & ROI 2. Exploit competitive position 3. Survival in a competitive market 4. Balance price over product line.
  • 17. Price versus Non price Competition - A company engages in price competition by regularly offering products priced as low as possible and typically accompanied by few, if any, services - Price competition can often be found in the retail sector - But: A low price should not be the only competitive advantage! Price Competition
  • 18. Price versus Non price Competition - In non price competition, sellers maintain stable prices and attempt to improve their market positions by emphasizing other aspects of their marketing programs - In non price competition, the emphasis is on something other than price! - The best approach in non price competition is to build strong brand equity Non price Competition
  • 19.  Setting the price 1. Setting the Pricing Objective 2.Determining Demand 3.Estimating costs 4.Analyzing competitor’s costs, prices and offers 5.Selecting a pricing method 6.Selecting the final price