Pricing rests on Value: Capturing value is its purpose<br />Process of creating, communicating, and delivering value<br />...
Pricing to capture value/Customer based approach<br />Customer value has to be key in the pricing <br />Pricing to value e...
Does pricing capture the due value? Or, are you competing away your resources?<br />Pricing that benefits only the buyer a...
Pricing objectives<br />Firms seek a mix of Objectives from pricing <br />Different permutations of objectives apply to di...
Setting the price <br />   Step  1  Selecting the pricing objectives<br />Survival<br />Maximum current profits<br />Maxim...
Pricing methods/Pricing strategies <br />Broad Categories of pricing methods<br />Cost based pricing<br />	Under cost base...
Demand Based Pricing<br />The following methods belong to the category of demand/market based pricing<br />What the traffi...
Competition oriented pricing<br />Premium pricing<br />Discount pricing<br />Parity pricing/Going rate pricing<br />
Product line pricing<br />Tender pricing<br />Affordability based pricing<br />Differentiated pricing <br />
Value>price>costs (this is not what we seek)<br />Price>costs>value (this is not what we seek)<br />Price=value>cost (this...
Setting the Price <br />Selecting pricing objectives<br />Survival<br />Maximum current Profit (Market skimming strategy)<...
Determining Demand <br />Price Sensitivity <br />Estimating Demand Curves<br />Surveys<br />Price Experiments<br />Statist...
Estimating Costs <br />Types of costs and levels of production <br />Variable costs<br />Total costs <br />Average Costs <...
Analyzing Competitors’ cost, pricing and offers<br />
Selecting Pricing Method<br />Markup Pricing <br />Target Return pricing <br />Perceived Value Pricing : total of- value p...
Selecting The final price<br />Impact of other marketing activities<br />Brands with average relative quality but high rel...
Adapting the Price <br />Geographical Pricing<br />Price Discounts & Allowances <br />Quantity Discount<br />Functional Di...
Differentiated Pricing<br />Price Discrimination<br />Customer Segment Pricing<br />Product Form pricing <br />Channel pri...
Initiating and Responding to Price Changes<br />Initiating Price Cuts<br />Low quality Trap <br />Fragile market Trap<br /...
Generally consumers Prefer Small Price increases on a regular basis instead of sudden<br />Several Techniques -  Sense of ...
Responding to competitors price change <br />
Pricing
Pricing
Pricing
Pricing
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Pricing

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Pricing

  1. 1. Pricing rests on Value: Capturing value is its purpose<br />Process of creating, communicating, and delivering value<br />Pricing, a complex task; There is Science side and an art side to it.<br />
  2. 2.
  3. 3. Pricing to capture value/Customer based approach<br />Customer value has to be key in the pricing <br />Pricing to value ensures two things: The customer finds the price justifiable monetary worth the offer , and the firm finds the price apt for earning its due share of value from the market by the way of sales, income and profits<br />
  4. 4. Does pricing capture the due value? Or, are you competing away your resources?<br />Pricing that benefits only the buyer and lands the company in red does not constitute value pricing. P&G was almost competing away the values of its offers.<br />Firms struggle to get the price value balance right. <br />
  5. 5. Pricing objectives<br />Firms seek a mix of Objectives from pricing <br />Different permutations of objectives apply to different firms<br />
  6. 6. Setting the price <br /> Step 1 Selecting the pricing objectives<br />Survival<br />Maximum current profits<br />Maximum market share<br />
  7. 7. Pricing methods/Pricing strategies <br />Broad Categories of pricing methods<br />Cost based pricing<br /> Under cost based category, the following methods/approaches are commonly used:<br />Mark up pricing<br />Absorption cost pricing<br />Target rate of return pricing <br />Marginal cost pricing<br />
  8. 8. Demand Based Pricing<br />The following methods belong to the category of demand/market based pricing<br />What the traffic can bear pricing <br />Skimming pricing<br />Penetration pricing <br />
  9. 9. Competition oriented pricing<br />Premium pricing<br />Discount pricing<br />Parity pricing/Going rate pricing<br />
  10. 10. Product line pricing<br />Tender pricing<br />Affordability based pricing<br />Differentiated pricing <br />
  11. 11. Value>price>costs (this is not what we seek)<br />Price>costs>value (this is not what we seek)<br />Price=value>cost (this is what we seek)<br />Pricing to value is the wining approach<br />
  12. 12.
  13. 13. Setting the Price <br />Selecting pricing objectives<br />Survival<br />Maximum current Profit (Market skimming strategy)<br />Maximum market Share<br />Market Penetration Pricing<br />Product Quality Leadership<br />Other Objectives<br />
  14. 14. Determining Demand <br />Price Sensitivity <br />Estimating Demand Curves<br />Surveys<br />Price Experiments<br />Statistical Analysis <br />Price elasticity of Demand <br />
  15. 15. Estimating Costs <br />Types of costs and levels of production <br />Variable costs<br />Total costs <br />Average Costs <br />Experience curve pricing <br />Target Costing <br />
  16. 16. Analyzing Competitors’ cost, pricing and offers<br />
  17. 17. Selecting Pricing Method<br />Markup Pricing <br />Target Return pricing <br />Perceived Value Pricing : total of- value perceived for each of the feature (tangible as well as intangible)of the product by the customers<br /> Going Rate Pricing<br />Auction Type Pricing <br />
  18. 18. Selecting The final price<br />Impact of other marketing activities<br />Brands with average relative quality but high relative advertising budgets were able to charge premium prices. Consumers were willing to pay higher prices for known products rather than unknown ones<br />Brands with high relative quality and high relative advertising obtained the highest prices. Conversely, brands with low relative quality and low advertising charged the lowest prices.<br />The positive relationships btw high prices and high advertising held most strongly in the later stages of the product life cycle for the market leaders.<br />Company Pricing Policies<br />Impact Of price on other Parties<br />
  19. 19. Adapting the Price <br />Geographical Pricing<br />Price Discounts & Allowances <br />Quantity Discount<br />Functional Discount <br />Seasonal Discount<br />Allowance<br />Promotional Pricing<br />Loss Leader Pricing<br />Special Event<br />Cash Rebates <br />Low interset Financing <br />Longer Paymnet terms<br />Warranties And Service Contracts <br />Psychological Discounting<br />
  20. 20. Differentiated Pricing<br />Price Discrimination<br />Customer Segment Pricing<br />Product Form pricing <br />Channel pricing - vending Machine<br />Location pricing - Theater <br />Time Pricing - Early Bird<br />
  21. 21. Initiating and Responding to Price Changes<br />Initiating Price Cuts<br />Low quality Trap <br />Fragile market Trap<br />Shallow Pocket Trap<br />Price War trap<br />Initiating Price Increase <br />Cost Inflation<br />Over demand<br />
  22. 22. Generally consumers Prefer Small Price increases on a regular basis instead of sudden<br />Several Techniques - Sense of fairness around any price increase <br />Making low visibility price moves such as eliminating discounts, increasing minimum order size and curtailing production of low margin products.<br />Shrinking amount of product <br />Substituting less expensive materials<br />Reducing product features <br />Reducing product services <br />Using less expensive packaging <br />
  23. 23. Responding to competitors price change <br />

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