Pricing - Strategies

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Factors affecting pricing decision AND …

Factors affecting pricing decision AND
Strategies followed by companies in reality

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  • 1. Prof  Shivananda  R  Koteshwar   Director,  The  Amaatra  Academy   shivoo@pes.edu  /  Facebook:  shivoo.koteshwar   You don’t sell through price. You sell the price. For Mount Carmel College BBM Students, Sept 2013
  • 2.   Factors  affecting  pricing  decision     Strategies  followed  by  companies  in  reality  
  • 3.   Consider   the   psychology   of   prices   and   not   simply   the   economics     Consumer  perception  of  value  is  important     Customers   use   price   less   when   they   can   judge   quality   of   a   product.     Price  becomes  an  important  quality  signal  when  customers   can’t  judge  quality;  price  is  used  to  say  something  about  a   product.       Price  often  depends  on  circumstances  –  You  always  pay  more   to  fly  when  you  want  to  fly         Consumers  are  often  prepared  to  pay  more  if  they  expect  to   get  excellent  service     Adding  value  doesn’t  mean  dropping  price     Price  will  be  compared    -­‐  Other  price  offers,  Prices  previously   paid,   Going   rate,   Alternative   product   price,   Alternative   substitute  price  
  • 4. Cost-plus pricing Price based on both demand and costs Price set in relation to market alone SELECT BASE PRICE DETECTION METHOD SELECT PRICING OBJECTIVE Profit Oriented Target return / Maximize Profit Sales Oriented Sales Volume / Market Share Status Quo Stabilize Price / Competition DESIGN APPROPRIATE STRATEGIES •  Price vs. nonprice competition •  Skimming vs. penetration •  Discounts and allowances •  Freight payments •  One price vs. flexible price •  Psychological pricing •  Leader pricing •  Everyday low vs. high-low pricing •  Resale price maintenance
  • 5. Internal reasons – Marketing objective (survival, market share, profit maximization, quality leadership), cost, etc External reasons - Nature of the market, demand, Competition, Environmental factors (economy, resellers, government)
  • 6. Loss leader
  • 7. Location Packaging Advertising Branding Service Sponsorship - £25m-a-year Tata, reliance, airtel, SBI, Infosys Amazon Google Apple UPS Sony 5c 5s Vertical product variation Product Modifications Product mix
  • 8. Captive Optional (Accessories) By Product Bundling
  • 9. Penetration Skimming SkimmingPenetration Move inventory, stimulate D, extend product life recover high R&D costs Price Lining Psychological Promotional
  • 10.   Pay  by  Use  has  picked  up     A  buyer  is  more  informed  (not  intelligent!)     Internet  has  changed  the  fundamentals    -­‐  Has   benefited  both  buyer  and  seller     Buyer:  Price  comparisons,  Offers,  Discounts,   Shared  Coupons,  Smart  Borrow  etc     Seller:  Larger  Buyer  base,  Smart  supply  chain   management,  Better  Value  maximization  and   Appropriation  possible,  Can  take  advantage  of   the  SEOs    &  Targeted  Advertisements  etc  
  • 11. Prof  Shivananda  R  Koteshwar   Director,  The  Amaatra  Academy   shivoo@pes.edu  /  Facebook:  shivoo.koteshwar   BLOG:  http://shivookoteshwar.wordpress.com   SLIDESHARE:  www.slideshare.net/shivoo.koteshwar