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Academic lecture
 

Academic lecture

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    Academic lecture Academic lecture Presentation Transcript

    • INTERACTIVE DISCUSSIONONPRICING STRATEGY
      VASUNDHRA GOEL
      MAFMG -10154
    • “The impact of change in pricing strategies from cost based to market oriented pricing strategy on the profits of Masoom(Non governmental organization)”
    • Masoom special school
      • Masoom, a school for children and youth with special needs is a registered non-governmental organization, situated in Timarpur, North Delhi.
      • 55 children and youth with special needs aged between 6-22 years.
    • Handloom products
      Handloom weaving process
    • “Today you have to run faster to stay in pace”
      (Philip Kotler)
    • Focus area
      Price: how much customers pay for a product
      Product: the features and appearance of goods and services
      Marketing mix
      Place: the point where products are made available to customers
      Promotion: how customers are informed about products
    • How has the concept of price and costing evolved?
      • Exchange of coincidence wants – Barter system
      • Invention of money.
      • Industrial revolution (18th to 19th century):
      Industries
      Factories
      Production
      Costing
      Price
    • Different views……………………………..
      Kotler (1976) and Assael (1985) identified three major strategies to be:1.Cost-oriented - methods based on cost plus mark-up, break-even, and target rate of return.2.Competition-oriented - entailing following the prices of competitors.3.Demand-oriented - pricing based mainly on the going price or customers perceived value.
      But, Gabor (1977) on the other hand classified pricing policies into two basic approaches - cost-based pricing and market-oriented pricing.
    • COST BASED PRICING STRATEGY(Raw materials + labor + overhead )+ profit margin = Price
      (Cost of production)
      • Cost based pricing is the simplest pricing method.
      • The firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the selling price.
      Cost of production + profit percentage = Selling price
    • But, this all has changed!
      Today – plenty of products available in the market!!!
      Customers have a choice………………
      Now its, the customer who decides the price that he is willing to pay $$$$
    • Question arises??????????????
      Should Masoom continue to sell at Rs 15 – or should they
      do a consumer analysis and develop a pricing strategy
      based on the customer analysis in order to generate more
      profits?
    • This is what is known as MARKET ORIENTED PRICING STRATEGY.
      • Setting a price based upon analysis and research compiled from the targeted market.
      • It is the pricing of products based on the market into which they are going to be sold.
      Today many companies are adopting this strategy.
      For example:
      BRITANNIA BISCUITS
      (Rs 5) (Rs 50)
    • But even the best make mistakes!!!!!!!
      UK leading retailers in clothing, home products and quality food.
      • Launched in India 2005, with their clothing line with up market prices.
      • Assumed that their brand name would sell ,and did not do an intensive customer analysis.
      • DID NOT DO WELL………………IN THE MARKET!
      “Today they have re priced their collections and targeted the pricing at what the market is willing to pay”.
    • BUT, smaller companies without marketing professionals etc.
      are facing a problem as they still follow cost based pricing
      strategy.
      Case study: Increase in profits of Masoom due to shift from cost based pricing to market oriented pricing strategy.
    • Based on a survey conducted by a marketing professional –
      Masoom raised it price per piece by 10%.
      • As a result, the sales in volume stayed the same.
      • But, profits went up by 20%.
    • According to cost based pricing method used by Masoom for mop:
      According to new strategy i.e. market oriented pricing method used by Masoom for mop: