Pricing-Singh Nindra
Upcoming SlideShare
Loading in...5
×
 

Pricing-Singh Nindra

on

  • 1,440 views

 

Statistics

Views

Total Views
1,440
Views on SlideShare
1,436
Embed Views
4

Actions

Likes
0
Downloads
58
Comments
0

1 Embed 4

http://www.slideshare.net 4

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Pricing-Singh Nindra Pricing-Singh Nindra Presentation Transcript

  • PRICING STRATEGIES
  • PRICING STRATEGIES U. SINGH NINDRA Business Development Manager a Fortune 7 Company with over $50 billion in annual revenues
  • PRICING STRATEGIES
    • Pricing is one of the most powerful weapons you can place in your arsenal.
    • Smart Pricing is an asset .
    • The key is to understand how customers perceive value.
  • PRICING STRATEGIES Winning pricing tactics Gain the edge on - tough competition, industry over capacity and diminishing margins. Outdated or conventional pricing methods - can be a real drain on your profit plan.
  • TYPES OF PRICING STRATEGIES
    • Differential Pricing
    • Competitive Pricing
    • Product Line Pricing
  • DIFFERENTIAL PRICING ... whereby the same brand is sold at different prices to consumers
  • COMPETITIVE PRICING ...whereby prices are set to exploit competitive position
  • PRODUCT LINE PRICING ... whereby related brands are sold at prices that exploit mutual dependencies
  • DIFFERENTIAL PRICING STRATEGIES
    • Second Market Discounting
    • Periodic Discounting
    • Random Discounting
  • SECOND MARKET DISCOUNTING
    • e.g., OEM parts facing competition from generic and lower priced parts.
    • Options - either maintain price and lose market share, or drop price and lose margin.
    • A relevant strategy might be to enter the generic market segment with an unbranded market and arrest the loss of sales to that segment without either foregoing margin or position in the branded segment.
  • SECOND MARKET DISCOUNTING
  • SECOND MARKET DISCOUNTING Community Involvement Advertising Promotions Discounts Quality Claims
  • PERIODIC DISCOUNTING
    • Temporary markdowns and periodic discounting of off-season fashion goods, off-season travel fares, matinee tickets and happy hour drinks.
    • The manner of discounting is predictable over time and not necessarily unknown to consumers.
    • If demand is not exactly known, a strategy of pricing high and systematically discounting with time is likely to ensure that the firm covers its costs and makes a reasonable profit.
  • RANDOM DISCOUNTING
    • The manner of discounting is crucial.
    • It should be “random” to uninformed consumers and infrequent, so that these consumers do not get lucky too often.
    • STRATEGY
    • Maximize the number of informed consumers at the low price.
    • Maximize the number of uninformed at the high price rather than the low price.
  • COMPETITIVE PRICING STRATEGIES
    • Penetration Pricing
    • Experience Curve Pricing
    • Price Signaling
    • Geographic Pricing
  • PENETRATION PRICING
    • Used to introduce new products
    • Used by a new competitor in the marketplace
    • Essentials for this strategy are
      • - price sensitivity on the part of consumers, and
      • - threat of competitive entry
  • EXPERIENCE CURVE PRICING D C B A Market Price Current Price YEARS DOLLARS Industry Costs 2 4 6 8 1 2 3 4 5
  • EXPERIENCE CURVE PRICING
    • Essential requirements:
    • Experience effects are strong
    • The firm has more experience than competitors
    • The consumers are price sensitive
  • PRICE SIGNALING Consumers may use price to infer quality It is most common for new or amateur consumers in a market, who do not know the quality of competitive brands but find quality important. Purchase of a high priced wine by the casual buyer
  • PRICE SIGNALING Consumers may use price to infer quality E&J Gallo Dom Perignon
  • PRICE SIGNALING
    • Essential requirements:
    • Information about price more easily available than information about quality.
    • Consumers must want high quality enough to risk buying the higher priced product even without a certainty of high quality.
  • PRICE SIGNALING
    • Essential requirements (contd.):
      • Thus, uninformed consumers who infer quality from price find it worthwhile to do so on average.
  • PRICE SIGNALING Pitfalls: Price Signaling used to fix prices Examples - Airlines, Energy
  • PRICE SIGNALING
    • Some Variations:
    • IMAGE PRICING
    • REFERENCE PRICING
      • A high priced model next to a much higher priced version of the same product, so that the former seem more attractive to risk averse uninformed consumers.
  • Reference Pricing MSRP: $89,220.00* 0-60 mph in 6.1 seconds 339 lb-ft @ 2,700 - 4,250 rpm 302 hp @ 5,600 rpm 5.0L 24-valve V-8 engine SL500 Roadster
  • Reference Pricing MSRP: $126,670.00* 0-60 mph in 4.5 seconds 590 lb-ft @ 1,800 - 3,500 rpm 493 hp @ 5,000 rpm Twin-turbocharged 36-valve 5.5L V-12 engine SL600 Roadster
  • GEOGRAPHIC PRICING Market segments separated by transportation costs -No discrimination between competing buyers in the same region (zone pricing) -The firm’s strategy should not appear to be predatory -In choosing the basing point, the firm should not attempt to fix prices among competitors
  • PRODUCT LINE PRICING STRATEGIES
    • Price Bundling
    • Premium Pricing
    • Image Pricing
    • Complimentary Pricing
  • PRICE BUNDLING Heterogeneity of demand for non-substitute perishable products Demand for films from two movie houses, Astro & Classic Maximum Price ($’000) paid by Film Classic Astro Romancing the Stone 12 18 Places in the Heart 25 10 What is the best pricing strategy?
  • PREMIUM PRICING
    • EXAMPLES:
    • Basic and specialty breads
    • Front and rear auditorium seating
    • Deluxe and basic hotel rooms.
    • Premium versions of autos differ from the basic only by features and options, whose production costs generally are not high enough to justify the higher mark up.
  • IMAGE PRICING
    • A firm brings out an identical version of its current product with a different name and a higher price.
    • The intention is to signal quality.
    • Differences between brands are not real but only in the images or positions adopted.
    • e.g., alternative brands of cosmetics, soaps, wines and dresses that differ only in brand names.
  • COMPLIMENTARY PRICING
    • THREE RELATED STRATEGIES
    • CAPTIVE PRICING
    • e.g., razors and blades, cameras and films, autos and spare parts, and computers and software packages. [durable goods & accessories]
    • If the premium on the accessories is too high, marginal producers of the accessories may enter the market and drive down the prices.
  • COMPLIMENTARY PRICING
    • TWO-PART PRICING
    • In case of services, it is known as Two-Part Pricing.
    • Service price is broken into two parts
        • fixed fee
        • variable usage fee
    • e.g., pricing by telephone & car rental companies
  • COMPLIMENTARY PRICING
    • LOSS LEADERSHIP PRICING
    • In retailing, it is known as Loss Leadership.
    • It involves dropping the price on a well-known brand to generate store traffic
    • The drop should compensate consumers for:
        • the transaction cost involved in making the extra trip
        • switching from their normal place of purchase
        • foregoing the cheaper basket of prices they pay at the alternative store
  • … and above all SMART PRICING STRATEGIES
  • … through SMART PRICING
    • Develop & sustain a competitive advantage
    • Become a leader in your market
    • Think long-term, and
    • DOMINATE YOUR MARKETPLACE