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Seliecting pricing policy

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  • 1.
    • SELIECTING PRICING POLICY:
    • POINT TO BE CONSIDERED: -
    • SELECTING THE PRICING OBJECTIVE
    • DETERMINING DEMAND
    • ESTIMATING COST.
    • ANALYSING COMPETITOR’S COSTS, PRICES & OFFERS.
    • SELECTING A PRICING METHOD.
    • SELECTING THE FINAL PRICE
    • DEVELOPING PRICE STRATEGIES
    • COMPANY FIRST DECIDES THE POSITIONING OF PRODUCT/SERVICE COMPNAY CAN FOLLOW FIVE MATOR OBJECTIVES:
    • (1) – SURVIVAL: PRICE SHOULD COVER MINIMUM VARIABLE COST & SOME FIXED COST UNDER EXTREEM COND.
  • 2.
    • (2) – MAXIMISING CURRENT PROFIT: PRODUCTS MAXIMUM ROL COMPNAY HAS KNOWLEDGE OF COST & DEMAND.
    • (3) – MARKET PENETRATION PRICING: (CONDITIONS FOR MPP)
    • (a) – PRICE SENSITIVE MARKET (b) – EXPERIENCE CURVE EFFECT (c) – DISCOURAGING COMPETITIONS
    • (4) – MAKET SKIMMING PRICE: FIXING HIGH PRICE: CONDITIONS: -
    • (a) – HIGH DEMAND (b) – SMALL QUANTITY PRODUCT COST NOT HIGH
    • (c) – TO CHECK COMPETITION (d) – CREATE SUPER IMAGE OF PRODUCT.
    • (5) – PRODUCT QUALITY LEADERHIP:
    • HIGH QUALITY – HIGH PRICE:
    • [II] – DETERMINING DEMARD: COMPANY STUDIES FOLLOWING:
    • (1) PRICE SENSITIVIY: CUSTOMERS MOST PRICE-SENSITIVE:
    • – HIGH COST OR FREQUENTLY BOUGHT PRODUCTS
    • (b) – LOW COST OR INFREQUENTLY BOUGHT PRODUCTS.
  • 3. (c) – PRICE IS SMALL PART OF OBTAINING, OPERATING, SERVICING [2] – ESTIMATING DEMAND CURVES FOLLOWING APPROACHES: (a) – ANALYSES PAT PERFORMANCE OF PRICE CHANGES (TIME SERIES STIME CROSS METHOD) (b) – ANALYSISING DIFFERENT PRICE EFFECTS IN SHOPS (C) – ASKING CUSTOMER TO BUY NUMBER OF UNITS AT DIFFERENT PRICE LEVEL. [3] – PRICE ELASTICITY OF DEMAND (a) - WHEN PRICE CHANGE MAKES MORE EFFECT ON DEMAND – PRICE ELASTIC (b) – WHEN EFFECT IS LESS – PRICE IN – ELASTIC (c) – DEMAND LESS ELASTIC UNDER FOLLOWING CONDITIONS (WHEN PRICE IS INCREASED) PRICE: (i) – LESS COMPETITION (ii) CONSUMERS DO NOT NOTICE HIGHER PRICE (iii) CONSUMER SLOW TO CHANGE PURCHASE HABBITS (iv) CONSUMER THINKS HIGHER PRICES ARE JUSTIFIED.
  • 4. [III] – ESTIMATING COST: TYPES OF COSTS: (1) (a) – FIXED COSTS (OVER HEADS) DO NOT VARY EPROT. (b) - VARIABLE COSTS: VARY DIRECTLY WITH PRODUCTION (c) – TOTAL COSTS: TOTAL OF FIXED + VARIABLE COST (d) – AVERAGE COST: TOTAL PRODUCTION : TOTAL UNITS (2) – ACCUMULATED PRODUCTION: - EXPERIENCE CURVE EFFECT: WITH EVERY DOUBLING – UP OF PRODUCTION, COST GOES DOWN BY 20-30% (3) – DIFERENTIATED MARKETING OFFERS: SOME TIME COMPANY HAS TO OFFER DIFFERENT PRCCES TO DIFFERENT CUSTOMERS. COMPANY CALCULATES COST OF VARLOUS ACTIVITIES INVOLVED IN GETTING A PARTICULAR SALE FOR FINICISING PRICE IT IS CACCES ABC (ACTIVITY BASED COST) (4) – TRGET COSTING: TAFANCSE METHOD. (a) – CALCULATE TARGET SELLING PRICE (b) – CALCULATE COST OF EACH ECEMENT (d) – DO VALUE ENGINEERING TO ….. TEAM …….. TARGET COST. (d) – THIS WILL HAVE BETTER CONSUMER ACCEPTANCE.
  • 5. [IV] – ANALYSIING COMPETITORS COSTS, PRICES, OFFERS: COMPANY SHOULD THOROUGHLY ANALYSES THE COMPETITORS “VALUE-CHAIN” [V] – SELECTING A PRICE METHOD: “3 CS” “ FIRST – C”: CUSTOMER DEMAND SCHEDULE “ SECOND – C”: THE COST FUNCTION “ THIRD – C”: COMPETITORS PRICES “ PRICE – SETTING METHODS”: (I) – MARK-UP PRICING: APDING FROFIT MARGIN OF TOTAL COST OF A UNIT (II) – TRAGET – RETURN PRICING: COMPANY FIXES – PRICE TO GET A TARGETTED RETURN ON INVESTMENT BREAK – EVEN POINT:
  • 6. REVENUE (SALE VOLUME IN UNITS (000’S) B.E CHART FOR TARGET-RETURN PRICE & B.E. POINT BE 300000 20-30 FXD COST PRICE PURCHASE 300000 UNITS = = = 1200000 1000000 800000 600000 400000 200000 10 20 30 40 50 BREAK EVEN POINT TOTAL REVENUE TARGET PROFIT TOTAL COST VARIABLE COST FIXED COST THOU-SANDS 300000 RS. FIXED COST ZONE REVENUE 0
  • 7. (3) – PERCEIVED – VALUE PRICING: COMPANY MUST DELIVER THE VALUE AS PROMISED IN THEIR PROPOSITION, MAY BE THREE TYPES OF BUYERS (a) PRICE – BUYERS (b) VALUE – BUYERS (c) LOYAL BUYER. (4) – GOING – RATE PRICING: COMPANY DECIDES PRICE TAKING INTO CONSIDERATION COMPETIPS PRICE (5) – AUCTION – TYPE PRICING: COMPANY INVITES PRICE OFFERS FROM BUYERS & THEN DECIDES (6) – GROUP – PRICING: BUYERS CONTRACT & FROM A GRUPS & COMPANY FIXES PRICE FOR THE GROUP. [VI] – SECECTING FINAL PRICE: PRICING METHODS NARROW THE RANGE FROM WHICH COMPANY MUST SELECT FINAL PRICE, KEEPING IS VIEW AFFECT OF ALL ECEMESTS OF MARKETING. (1) – PSYCHOLOGICAL PRICING: HIGH PRICEING QUALITY (2) – GAIN & RISK SHARING PRICING: SELLER COVERS THE RISK OF BUYER BY PRICE COMPENSATION (TRANSPORT COMPANIES)
  • 8. ADAPTING THE PRICE: COMPANY AS A MARKETING STRATEGY ADOPLS SEVEFAL PRICEING – SUCH AS GEOGRAPHICAL , PRICE-DISCOUNT, PROMOTIONAL – PRICING, PRODUCT MIX PRICING. IMTIATING & RESPONDING TO PRICE – CHANGES: (1) – INITIAL PRICE CUTS: UNDER SPECIDE MAKETING CONDITINS COMPANY APORT PRICE-COST STRATEGY INITIATING PRICE INCREASE: AS PER SITUATION COMPANY ……. PRICE AREA. RESPONDING TO COMPETITOR’S PRICE CHANGE: BRAND LEADER CAN RESPOND IN FOLLOWING WALL (1) – MAINTAIN PRICE & WATCH (2) – MAINTAIN PRICE & ADD VALUE (3) – REDUCE PRICE (4) – INCREASE PRICE & IMPROVE QUALITY (5) – LAUNCH A “LOW-PRICE-FIGHTER” LINE O PRODUCTS:
  • 9. SELECTING THE PRICE OBJECTIVES DETERMINING DEMAND ESTIMATING COST ANALYSING COMPETITORS COST, PRICE, OFFER SELECTING THE FINAL PRICE INTRODUCTION SETTING PRICING POLICY I II III IV V