Factors that companies keep in mind while setting the prices. Entire process of price setting.

1. Setting The
Price
Ankeita Mall
S.G.S.I.T.S.

2. How should companies
set prices initially for
products or services?

3. 6 Steps in Setting
a Pricing Policy

4. 1.
Selecting
the
Principle
Objective

5. The clearer a Firm’s
Objectives, the easier
it is to set Price

6. Survival
Maximum
Current Profit
Maximum
Market Share
Maximum
Market
Skimming
Product
Quality
Leadership
5 Major Objectives

7. 2. Determining
Demand

8. Each Price leads to
different level of
demand

9. Factors leading to Less Price
Sensitivity
• More Distinctive Product
• Buyers are less aware of substitutes
• Expenditure is smaller part of Buyer’s
income
• Product is used in conjunctive with assets
previously brought
• Product is assumed to have more quality,
prestige and exclusiveness

10. Internet increases Price
Sensitivity to a Great
Extent

11. Estimating Demand Curve
1. Surveys
2. Price Experiments of
products
3. Statistical Analysis of past
prices, quantities sold,
etc.

12. 3. Estimating
Costs

13. Companies want to charge
a Price that includes
• Cost of Production
• Cost of Distributing and
Selling the Product
• A fair return for its risks

14. Types of Costs
Fixed cost- Cost that do not vary with production.
Like the bills, rent, salaries etc
Variable Cost- Varies with level of Production
Total Cost- Sum of Fixed Cost and Variable Cost for
any level of Production
Average Cost- Cost Per Unit

15. 4. Analyzing
Competitor’s
Costs, Prices
and Offers

16. Setting Prices and
Offers by taking
into account
Competitor’s Cost,
Prices and Offers.

17. 5. Selecting a
Pricing
Method

19. Price Setting Methods
Markup Pricing- Method to Add a Standard Markup
(Profit) to the product’s cost.
Target Return-
Pricing
The Firm determines the price that yields
its target rate of return on investment.
Public utilities often use this method

20. Perceived Value Pricing-
It is made up of hosts of
inputs, such as buyer’s
image of product
performance, the channel
deliverables, the warranty
quality, customer support,
supplier’s reputation and
trustworthiness.

21. Value Pricing-
It is a matter of
reengineering the
company’s operations to
become a low cost
producer without
sacrificing quality.

22. Going Rate-
Pricing
In this the Firm bases its price largely on
competition prices. Smaller Firms follow the
leader. In steel, paper and fertilizer industries
Auction Type-
Pricing
Auction for buying and selling products
and is mainly of three types
• English auction(Ascending bids)
• Ditch auction(Descending bids)
• Sealed Auction

23. 6.
Selecting
the Final
Price

24. Following factors should be kept
in mind before selecting the Final
Price
• Impact of other marketing activities
• Company Pricing Policies
• Gain and Risk Sharing Pricing
• Impact of Pricing on other Parties

25. RECAP
• Ways to set the price
• Selecting the Pricing Objective
• Determining Demand
• Estimating Cost
• Analyzing Competitor’s Costs, Prices and Offers
• Selecting a Pricing Method
• Selecting the Final Price

26. Created by ANKEITA MALL,
S.G.S.I.T.S. , during an
internship by Prof. Sameer
Mathur, IIM Lucknow.
www.IIMInternship.com