Pricing Strategiesand Determination       Manish Kumar
What is Price? Price is the sacrifice that one party  pays another to receive something  in exchange For our case, price...
Determining the Base Price   Cost-Plus Pricing       Easiest, Often misleading       A simple allocation of fixed and  ...
Determining the Base Price   Demand Pricing       Based on the elasticity of demand         • Higher prices are favored ...
Determining the Base Price   Demand Pricing       Profit-Maximization         • Calculate the profit at each price point...
Determining the Base Price   Demand Pricing       Where does demand information        come from?         • Analytic mod...
Determining the Base Price                                   Ethical               LegalStrategic Pricing                 ...
Determining the Base Price                                   Ethical               LegalStrategic Pricing                 ...
Determining the Base Price                                   Ethical               LegalStrategic Pricing                 ...
Determining the Base Price                               Ethical            LegalStrategic Pricing             Concerns   ...
Determining the Base PriceStrategic        Ethical                            Legal Concerns                Concerns Prici...
Determining the Base Price                                                          Ethical    Strategic                  ...
Determining the Base Price                                                          Ethical    Strategic                  ...
Determining the Base Price                            Ethical          LegalStrategic Pricing          Concerns         Co...
Adjustments to Base Prices   Reasons base prices change over    time:       Variation in objectives over product        ...
Price Flexing Discounts/Allowances Reasons     base prices change over time:     Price Flexing - Discounts/Allowances   ...
Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances    Usedto   Cash Discounts                        encou...
Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances    Seasonal or age-   Cash Discounts                   ...
Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances    After                             the   Cash Discoun...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade      Compensate the                           trade for fu...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade    Permitsseasonal      Seasonal          marketers to    ...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade      Seasonal                       Price      Quantity    ...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade      Induce larger-                           quantity pur...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade      Encourage prompt                           payment fr...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade      Two percent off the                           total i...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade    Used  by producers      Seasonal          to encourage ...
Price Flexing Discounts/AllowancesTo Trade Functional Or Trade                           Off-Invoice      Seasonal        ...
Other Forms of Price Flexing   Price shading       Salesperson reduces        base price because of the        need to s...
Other Forms of Price Flexing   Price promotion       Sales, incentive pricing       Retailers began forward-        buy...
Other Forms of Price Flexing Pricing    for different segments     Geographic segments       • Different prices in diffe...
Geographic Pricing Policies FOB              Uniform                  DeliveredPricing            Pricing Zone           B...
Geographic Pricing Policies     FOB                  Basing-Point    Pricing                 Pricing                 Zone ...
Geographic Pricing Policies     FOB                  Basing-Point    Pricing                 Pricing                Zone  ...
Geographic Pricing Policies     FOB                   Basing-Point    Pricing                  Pricing                 Zon...
Geographic Pricing Policies     FOB                  Basing-Point    Pricing                 Pricing                 Zone ...
Pricing Policies              Prestige              PricingLoss-Leader              Odd-Even  Pricing                 Pric...
Pricing Policies                          Prestige                          Pricing            Loss-Leader              Od...
Pricing Policies                          Prestige                          Pricing            Loss-Leader              Od...
Pricing Policies                           Prestige                           Pricing             Loss-Leader             ...
Pricing Policies                         Prestige                         Pricing           Loss-Leader              Odd-E...
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Marketing Mix Price

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Detail explanation of Marketing Mix 7P's pRICE

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Marketing Mix Price

  1. 1. Pricing Strategiesand Determination Manish Kumar
  2. 2. What is Price? Price is the sacrifice that one party pays another to receive something in exchange For our case, price is a monetary value charged by an organization for the sales of its products
  3. 3. Determining the Base Price Cost-Plus Pricing  Easiest, Often misleading  A simple allocation of fixed and variable costs  Standard mark-up - a standard profit margin  Target return pricing - a standard amount of profit per item  Ignores demand (price sensitivity) and fails to account for competition
  4. 4. Determining the Base Price Demand Pricing  Based on the elasticity of demand • Higher prices are favored with inelastic – Price increases offset volume losses • Lower prices are favored with elastic – Volume increases offset price reductions • Consumers are indifferent with unitary demand  Breakeven analysis  Demand schedules
  5. 5. Determining the Base Price Demand Pricing  Profit-Maximization • Calculate the profit at each price point on a demand curve and choose the highest • In other words, which price produces the highest total contribution • Verified by observing marginal revenue and cost figures
  6. 6. Determining the Base Price Demand Pricing  Where does demand information come from? • Analytic modeling • Experiments • Customer surveys • Managerial judgement
  7. 7. Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns Low cost Differentiation focus focus price unique Competitive Strategy Positioning Continuum
  8. 8. Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns Low cost Differentiation focus focus price unique Competitive Strategy Positioning Continuum
  9. 9. Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns Low cost Differentiation focus focus price unique Competitive Strategy Positioning Continuum
  10. 10. Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns  Objectives  Goal-setting/Objective-setting  Pricing to achieve a target ROI  Pricing to stabilize price and margin  Pricing to reach a target market share  Pricing to meet or prevent competition  Pricing for profit maximization  Pricing for survival
  11. 11. Determining the Base PriceStrategic Ethical Legal Concerns Concerns PricingConcerns Penetration Skimming Pricing Pricing Strategy Strategy Maturity Decline Growth Introduction  New product pricing  Skimming Vs. Penetration
  12. 12. Determining the Base Price Ethical Strategic Legal Concerns Concerns Pricing Penetration Concerns Pricing Strategy Skimming Pricing Maturity Decline Strategy GrowthIntroduction  High initial price for quick ROI  Inelastic demand  Price insensitivity by the market
  13. 13. Determining the Base Price Ethical Strategic Legal Concerns Concerns Pricing Skimming Pricing Concerns Strategy Penetration Pricing Maturity Decline Strategy GrowthIntroduction  Low initial price with elastic demand  Volume for lower production costs  Imminent competition
  14. 14. Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns  Price-Quality judgements  Customers uncertain about brand quality prior to purchase look to price  Customers look to price in high risk purchases
  15. 15. Adjustments to Base Prices Reasons base prices change over time:  Variation in objectives over product life cycle • Introductory low prices, higher decline prices  Competitive price moves • Competitive forces dictate modification of pricing
  16. 16. Price Flexing Discounts/Allowances Reasons base prices change over time:  Price Flexing - Discounts/Allowances To Consumer To Trade Trade-in Allowances Functional Or Trade Cash Discounts Seasonal Rebates Quantity Cash Sales Promotion
  17. 17. Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances  Usedto Cash Discounts encourage consumers to Rebates upgrade to newer or more expensive products
  18. 18. Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances  Seasonal or age- Cash Discounts based discounts used to encourage Rebates purchases
  19. 19. Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances  After the Cash Discounts purchase payment made to the Rebates consumer by the producer
  20. 20. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Compensate the trade for functions Seasonal performed: Buying & Selling Quantity   Transportation  Storage Cash  Financing  Risk-taking Sales Promotion  Providing Information  Standardizing & Grading
  21. 21. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Permitsseasonal Seasonal marketers to maintain steady Quantity production and to Cash sustain operations in out- Sales Promotion of-season lulls
  22. 22. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade Seasonal Price Quantity Cash Spring Summer Fall Winter Sales Promotion
  23. 23. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Induce larger- quantity purchases Seasonal and to reward Quantity customers for making fewer Cash purchases but Sales Promotion purchasing in larger quantities
  24. 24. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Encourage prompt payment from Seasonal customers. Invoice Quantity includes payment terms and period of Cash time that the cash Sales Promotion discount is available
  25. 25. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Two percent off the total invoice price if Seasonal paid within 10 days Quantity of the invoice date. Otherwise the total Cash invoice price is due Sales Promotion in 30 days 2/10, Net 30
  26. 26. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Used by producers Seasonal to encourage greater purchases Quantity or used to induce Cash retailers to provide shelf or Sales Promotion display space
  27. 27. Price Flexing Discounts/AllowancesTo Trade Functional Or Trade Off-Invoice Seasonal Allowances Quantity Bill-Back Allowances Cash Sales Promotion Stocking Allowances
  28. 28. Other Forms of Price Flexing Price shading  Salesperson reduces base price because of the need to secure a large/important client Price customizing  New technology allows for transaction-by- transaction customization
  29. 29. Other Forms of Price Flexing Price promotion  Sales, incentive pricing  Retailers began forward- buying or diverting product  Every Day Low Pricing (EDLP) is reducing the use of price promotion Couponing  Free-standing inserts (in newspapers)  Point of purchase
  30. 30. Other Forms of Price Flexing Pricing for different segments  Geographic segments • Different prices in different zones  Usage segments • Different prices for high volume users  Demographic segments • Different prices for students, children, etc.  Time segments • On- and off-season rates
  31. 31. Geographic Pricing Policies FOB Uniform DeliveredPricing Pricing Zone Basing-PointPricing Pricing
  32. 32. Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using freight absorption pricing (FOB - Free On Board) the seller pays or absorbs the transportation charges
  33. 33. Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using zone pricing all consumers in the same zone pay the same transportation charge
  34. 34. Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using basing-point pricing, all freight costs are priced as if they originated from the same basing point
  35. 35. Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using uniform delivered pricing all consumers pay the same transportation charges (average shipping expense to all customers)
  36. 36. Pricing Policies Prestige PricingLoss-Leader Odd-Even Pricing Pricing Product Line Pricing
  37. 37. Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Pricing at relatively high levels so as to convey an image of high quality or exclusivity
  38. 38. Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Pricing policy which offers products at prices below or near cost to attract consumers from competitors’ stores
  39. 39. Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Price lining is producing or marketing multiple products at different price points Bundling is marketing two or more products in a single package for a special price
  40. 40. Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Odd pricing refers to a price ending with an odd number just under a round number Even pricing is used to convey high quality
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