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Marketing management


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Marketing management

  1. 1. Chapter no.1 ahsanullah mohsen 2
  2. 2. ahsanullah mohsen 3
  3. 3. THE SCOPE OF MARKETING is marketing? What is marketed? Who ahsanullah mohsen What markets? 4
  4. 4. ahsanullah mohsen 5
  5. 5. ahsanullah mohsen 6
  6. 6. ahsanullah mohsen Peter Drucker: The aim of marketing is to know & understand the customer so well that the product or service fits him & sells itself. All that should be needed is to make the product or the services available. 7
  7. 7. WHAT IS MARKETED? 1. 3. 4. 5. 6. 7. 8. 9. 10. ahsanullah mohsen 2. Goods Services. Events. Experiences(water park) Persons Places Properties Organizations Information ideas 8
  8. 8. WHO MARKETS?  Marketers and prospects. ahsanullah mohsen  Markets  Market   places, Market spaces Metamarkets. 9
  9. 9. COMPANY ORIENTATION TOWARDS THE MARKETPLACE 1. 3. 4. 5. 6. ahsanullah mohsen 2. The production concept The product concept The selling concept The marketing concept(customer orientation, satisfaction, integrated mgt., realization all organizational goals). Social marketing concept. The holistic marketing concept(every thing matters) 10
  10. 10. ahsanullah mohsen 11
  11. 11. ahsanullah mohsen 12
  12. 12. ahsanullah mohsen 13
  13. 13. ahsanullah mohsen 14
  14. 14. ahsanullah mohsen 15
  15. 15. ahsanullah mohsen 16
  16. 16. ahsanullah mohsen 17
  17. 17. HOW BUSINESS AND MARKETING ARE CHANGING THE WORLD? 1. 3. 4. 5. 6. 7. 8. ahsanullah mohsen 2. Changing technology Globalization Deregulation Privatization Customer empowerment Customization Heightened competition Industry convergence 18
  18. 18. CHAPTER NO.2 MARKETING ENVIRONMENT  ahsanullah mohsen The collection of non-marketing influences that have an impact on a marketing manager's success in forming and keeping favorable relationships with desirable customers. The overall market environment for a business is made up of the macro environment that consists of broader societal influences and the microenvironment which includes company related influences. 19
  19. 19. ahsanullah mohsen 20
  20. 20.  Purpose of marketing environment Trends in the environment b) Strategic response c) Opportunities d) Right fit between business and envt ahsanullah mohsen a) 21
  21. 21. MICRO ENVIRONMENT The micro environment refers to the forces that are close to the company and affect its ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets and publics.  Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to customers in the time frame required in order to maintain a strong customer relationship.  ahsanullah mohsen 22
  22. 22. Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries . These are the people that help the company promote, sell, and distribute its products to final buyers.  Resellers are those that hold and sell the company’s product.  Physical distribution firms are places such as warehouses that store and transport the company’s product from its origin to its destination.  Marketing services agencies are companies that offer services such as conducting marketing research, advertising, and consulting.  ahsanullah mohsen 23
  23. 23. Financial intermediaries are institutions such as banks, credit companies and insurance companies.  Another aspect of microenvironment is the customers. There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets.  Competitors are also a factor in the microenvironment and include companies with similar offerings for goods and services  The final aspect of the microenvironment is publics, which is any group that has an interest in or impact on the organization’s ability to meet its goals.  ahsanullah mohsen 24
  24. 24. THE MARKETING ENVT., CONSISTS OF THE FOLLOWING FACTORS MACRO ENVIRONMENT ahsanullah mohsen The macro environment refers to all forces that are part of the larger society and affect the microenvironment. It includes concepts such as demography, economy, natural forces, technology, politics, and culture. Factors affecting organization in Macro environment are known as PESTEL, that is: Political, Economical, Social, Technological, Environmental and Legal. 25
  25. 25.  • • •  ahsanullah mohsen • The Demographic Environment :Demography refers to studying human populations in terms of size, density, location, age, gender, race, and occupation. This is a very important factor to study for marketers and helps to divide the population into market segments and target markets. Ex. classifying groups of people according to the year they were born. World wide population growth Population age mix Literacy level of population 26
  26. 26.  • • • • • • • • • ahsanullah mohsen • Economic Environment: This refers to the purchasing power of potential customers and the ways in which people spend their money. Income distribution General economic condition Disposable income and purchasing power Rate of growth of economy Credit availability and interest rate Inflation rate Foreign exchange reserve Exchange rate Tax rate Behaviour of capital market 27
  27. 27.        ahsanullah mohsen  Social – Cultural environment: consists basic values and beliefs of a group of people Culture: is the combined result of factors like religion, language, education and upbringing. Social class: is determined by income, occupation, location of residence etc. Each class has its own standards with respect to lifestyle behaviors etc., they are known as class values or class norms. Natural environment: This includes the natural resources that a company uses as inputs that affects their marketing activities. Natural resources: raw material is one major part these resources and firm are concerned with its availability, they need to know whether there will be a shortage in any of the critical raw materials, they also need to know the trends governing their cost. Ecology: issues like environmental pollution, protection of wild life are the factors concerned with ecology. Climate: this is the concern of firms whose product demand depends on climate factors. 28
  28. 28.         ahsanullah mohsen  Technological environment: is perhaps one of the fastest changing factors in the macroenvironment. it affects final product processes operation …. A firm has to assess the relative merits and cost effectiveness of alternate technology. govt’s approach in respect of technology: regulation of government restricts the operation of a firm. Technology selection: firms have to scan the technology environment and select technologies that will be appropriate for the firm. Accelerating pace of change: Unlimited opportunities for innovation Varying R&D budgets Increased regulation of technological chance 29
  29. 29. Political- legal Environment: includes all laws, government agenicies, and groups that influence or limit other organizations and individuals within a society. legal environment depends on:  Corporate affairs  Consumer protection  Employee protection  Sectorial protection  Corporate protection  Protection of society  Regulation on products, prices and distribution  Control on trade practices  Protect national firms against fore  Increase in business legislation  Growth of special interest group  ahsanullah mohsen 30
  30. 30. CHAPTER NO.3 BUYERS BEHAVIOUR & MARKETING SEGMENTATION marketers must fully understand both the theory & reality of consumer behaviour. A consumer’s buying behaviour is influenced by cultural, social & personal factors & they are a part of the buyer as an individual. (1) Cultural Factors :Each culture consist of various subcultures that provide more specific identification. It includes nationalities, religions, social groups & geographic regions.  ahsanullah mohsen 31
  31. 31. Social Factors :Consumer’s behaviour is influenced by social factors such as reference groups, family, social roles & status.  Reference Groups : A person’s reference groups consist of all the groups that have a direct or indirect influence on his attitude. They can be family friends, neighbours, coworker, religious, professional & trade union groups.Reference groups expose an individual to new behaviours & lifestyles & influence attitude & self concept.  Family :From parents a person acquires an orientation toward religion politics & a sense of personal ambition, self-worth & love. (2) ahsanullah mohsen 32
  32. 32. Role & Status : The person’s position in each group can be defined in terms of role & status.  (3) Personal Factors : The personal factors include the buyer’s age & stage in the life cycle, occupation & economic position, personality & self concept lifestyle & values.  ahsanullah mohsen 33
  33. 33. BUYING DECISION PROCESS. The consumer passes through 5 stages : problem recognition information search, evaluation of alternatives; purchase decision, & post purchase behaviour. (1) Problem Recognition : this is when a customer feels he need something. (2) Information Search : Through gathering information, the consumer learns about competing brands & other features. (3) Evaluation of Alternatives : first the consumer is trying to satisfy a need, second the consumer is looking for certain benefits & third the consumer views each product as a bundle of attributes to satisfy this need. (4) Purchasing decission:  ahsanullah mohsen 34
  34. 34. Purchasing decision: only if the buyer is convinced about the correctness of purchasing decision, then will proceed. 5. Post Purchase Behavior : The purchase leads to a specific post purchase behavior, usually it creates some restlessness in the mind of the individual. The marketer should monitor the followings:  Post purchase satisfaction  Post purchase action  Post purchase uses 4. ahsanullah mohsen 35
  35. 35. MARKET SEGMENTATION To compete more effectively, many companies go for target marketing which can establish & communicate the distinctive benefits of the company’s market offering. This process is called as market segmentation. the aggregate of consumers of a given product and consumers vary in their characteristics buying behaviour. It is feasible to disaggregate the consumers into segments in such a manner that in needs characteristics & buying behaviour, the members vary significantly among segments. ahsanullah mohsen Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other ways that best allow to reach them. 36
  36. 36. CRITERIA FOR SEGMENTING  1. 2. 4. 5. 6. 7. 8. ahsanullah mohsen 3. An ideal market segment meets all of the following criteria: It is possible to measure. It must be large enough to earn profit. It must be stable enough that it does not vanish after some time. It is possible to reach potential customers via the organization's promotion and distribution channel. It is internally homogeneous (potential customers in the same segment prefer the same product qualities). It is externally heterogeneous, that is, potential customers from different segments have different quality preferences. It responds consistently to a given market stimulus. It can be reached by market intervention in a costeffective manner. 37
  37. 37. BENEFITS OF SEGMENTATION 1. 3. 4. ahsanullah mohsen 2. Facilitates Proper Choice of Target Market : marketer can not target all areas, this will enable him to know his specific market. Facilitates controlling of the Market: marketer will know the need of consumer in a better way because the market is segmented to small parts. Makes the Marketing Effort More Efficient & Economic: the resources of any firm are limited & no firm can normally afford to attack & tap the entire market. Benefits the customer as well: products will be available as per their choices. 38
  38. 38. BENEFITS OF SEGMENTATION 5. ahsanullah mohsen 6. Helps spots (consider) the less satisfied segments & succeed by satisfying such segments. Helps achieve the specialization required in product, distribution, promotion & pricing for matching the customer group & develop marketing offers. 39
  39. 39. DISADVANTAGES OF MARKET SEGMENTATION Puts all eggs in one basket.  Small shift in the population or consumer tastes can greatly effect the firm.  May have trouble expanding into new markets (especially up-market). Up-market: Appealing to or designed for high-income consumers  ahsanullah mohsen 40
  40. 40. BASIS FOR MARKET SEGMENTATION 1.      ahsanullah mohsen 2. Geographic Segmentation: dividing the market into different geographical units such as nations, regions, countries, cites or neighborhood. Demographic Segmentation: In demographic segmentation, the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income occupation, education religion, race generation, nationality & social class. Age & Life Cycle Stage: Consumer wants & abilities change with age. Gender: Men & women have different behavioral orientation. Income: low priced product middle income group. Generation: Each generation is deeply influenced by the time in which it grows- the music movies, politics. Social Class : has a strong influence of preferences on products like car…. 41
  41. 41. BASIS FOR MARKET SEGMENTATION 3. ahsanullah mohsen 4. Psychographic Segmentation: The strict norms, that consumers follow with respect to good habits or dress codes are representative. Behavioural Segmentation: different customer groups expect different benefits from the same product & accordingly they will be different in their motives in owning it. Degree of use can be another base, they can be segmented on the basis of whether they are light, medium or heavy users of the product or whether they are enthusiastic or indifferent or negative towards the product. 42
  42. 42. LEVELS OF MARKET SEGMENTATION Segment Marketing: A market segment consist of a group of customers who share a similar set of needs & wants.  Niche Marketing : A niche is a narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments.  Local Marketing : Target marketing is leading to marketing programs tailored to the needs & wants of local customers groups.  Customization : The ultimate level of segmentations leads to one to one marketing.  ahsanullah mohsen 43
  43. 43. CHAPTER NO.4 MANAGING THE PRODUCT Product Life Cycle( PLC):A product passes through distinct stages during its life & is called product life cycle.  Because most companies understand the different product life cycle stages, and that the products they sell all have a limited lifespan, the majority of them will invest heavily in new product development in order to make sure that their businesses continue to grow. ahsanullah mohsen  44
  44. 44. ahsanullah mohsen (a) Introduction Stage: The product is in introductory stage. At this stage, there may not be a ready market for the product. Sales are low. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.  One of the crucial decisions to be taken in this stage is the pricing strategy to be adopted either market skimming(high price) or market penetration(low price). 45
  45. 45. Growth Stage : During the market growth stage, demand for the product increases & size of market grows. The sales & profits also go up.  New competitors may enter the market. The marketer has to stay ahead of his competitor & has to reconsider his pricing strategy. He follows competition oriented pricing, because the total market is being shared among many firms.  Marketing & distribution efficiency becomes decisive factor at this state. (b) ahsanullah mohsen 46
  46. 46. Maturity Stage: : In the maturity stage, the demand tends to reach a saturation point & there is enough supply from competitive sources.  Price competition becomes intense & exploits the brand loyalty.  Long term & short term marketing plans are implemented to profitably prolong the maturity stage.  Deals & make special offers to new market segments so that his sales volume do not shrink(become smaller). (c) ahsanullah mohsen 47
  47. 47. Decline Stage : In the decline stage, sales begin to fall.  due to new & functionally advanced products, becoming available in the market demand decreases.  Because of less sales profit decreases.  But some firms at this stage may try to link up the sales of these products with some other premium products they have developed & thus try to stretch the life of the decline product. (d) ahsanullah mohsen 48
  48. 48. BENEFITS OF PLC PLC concept helps & is used as a tool in formulating& implementing marketing strategy.  • It facilitates pre planning the product launch.  • Facilitates prolonging the profitable phase.  • Facilitates investment decisions on products.  • Facilitates choice of appropriate entry strategy.  • Facilitates choice of the right time to exit.  • Provides useful clues(tips) for managing customers.  ahsanullah mohsen 49
  49. 49. SUMMERY CHART OF PLC introduction growth maturity decline sales Low sales Rapidly rising sale Peak sales Declining sales cost High cost per customer Average cost per customer Low cost per customer Low cost per customer profit negative Rising profit High profits Declining profit competitors few growing stable Declining no. Marketing objective Create product Maximize market awareness and share trail Maximize profit while defending market share Reduce expenditure price Cost plus Penetrate market competitors Cut price Reduce to take advantage of heavy customer demand Increase to encourage brand switching Reduce to 50 minimal level characteristics ahsanullah mohsen Sales promotion heavy
  50. 50. NEW PRODUCT DEVELOPMENT(NPD) The various stages in NPD are :(1) Generating New Product Ideas : New product ideas may come from customers, dealers, in company sources including the market research group & external research organization. ahsanullah mohsen new product development (NPD) is the complete process of bringing a new product to market. To create the next product in a company’s product line a design team goes through product development process steps 51
  51. 51. ahsanullah mohsen (2) Idea Screening: In this stage, various new products ideas are put under severe screening by evaluation committees. (3) Concept Testing: What is tested at this stage is the product concept itself, whether the prospective customers understand the product ideas, whether they are receptive forwards the ideas; whether they actually need a product. (4) Business / Market Analysis: whether from the financial & marketing point of view, the project is worth proceeding with. . Investment analysis & profitability analysis of the project under different assumptions are made at this stage. 52
  52. 52. ahsanullah mohsen (5) Estimating the Demand for New Product: (a) Substitution method (b) End use method.  In substitution method, the demand for the existing product is forecasted using standard forecasting method. Based on that, an idea of the demand for the new product is gained.  In, end use method, products that have an altogether new end use do come to the marketer once in a while. (6) Actual Development of the Product: in this stage the actual product is developed, as it may be in market 53
  53. 53. ahsanullah mohsen (7) Market Test: Now, the new product has to be tried out in selected market segments. Market test is essentially a risk control tool. It is experimental marketing at minimum cost & risk. (8) Test Marketing : In test marketing, the new product, with the support of the chosen marketing mix is actually launched & marketed in few selected cities / towns / territories. (9) Commercialization : At this stage, the company takes the decision to go in for large scale manufacturing & marketing of the product. At this stage the company fully commits itself to commercialize the new product with the required investment in manufacturing & marketing. 54
  54. 54. ahsanullah mohsen 55
  55. 55. Packaging: ahsanullah mohsen Processes (such as cleaning, drying, preserving) and materials (such as glass, metal, paper or paperboard, plastic) employed to contain, handle, protect, and/or transport an article. Role of packaging is broadening and may include functions such as to attract attention, assist in promotion, provide machine identification (barcodes, etc.), impart essential or additional information, and help in utilization. Packaging contains, protects, preserves, transports, informs, and sells. 56
  56. 56. MAIN DECISION AREAS IN PACKAGING ahsanullah mohsen (a) Package Materials : Changing trends - from wood to paper & plastics (b) Package Aesthetics(beauty) : For enhancing the sales appeal of the package, more & more attention is now being given to package. (c) Package Size & Convenience : 1. The cold drink cans 2. Reusable containers 3. Refill packs. 57
  57. 57. LABELING • Function of Label could be: 1. Identify product. 2.Describe product. 3.Grade product. 4.Promote product. • Current consumer law requires label to convey: Product price. Grade (if applicable). Manufacturing date. Percentage label (% of important ingredients). Batch Number. ahsanullah mohsen “The label may be a simple tag attached to the product or an elaborately designed graphic”. The silver foil in dairy milk chocolate is the Package, while the written material cover is the Labeling. • Labeling is a subset of packaging. • Labels are mandatory for package products. • Labels could range from a single tag attached to a product, to an elaborately designed graphic that is part of packaging. 58
  58. 58. APPRAISAL OF PRODUCT LINE A growing business has to undertake a constant appraisal of its existing product lines. No product runs for all time to come and no product line is perfect eternally. Changes in the business environment, in customer tastes and preferences, as also the extent of competition building up, all exercise some pressure on the product policy of a firm.  Product line appraisal is a dynamic task.  ahsanullah mohsen 59
  59. 59. ahsanullah mohsen What is product-mix ?• Set of all product offered for sale by a company.• It consist of various product line.• Any company’s product mix has four dimension : 1. Width 2. Length 3. Depth 4. Consistency 1. Length: Total number of items in the product mix of the company 2. width or breadth the number of product lines that a company offers. 3. Depth: the different varieties of product in the product line or Assortment of size, color and models offered in each item of a product line) 4. Consistency: relationship of various product line either in their end use, production requirement, distribution channel or other way. 60
  60. 60. PRODUCT-LINE LENGTH  Line Down-market stretch—introduce a lower-priced line.  Up-market stretch—enter the high end of the market.  Two-way stretch—product lines in both directions.  ahsanullah mohsen stretching—occurs when a firm lengthens its product line beyond the current range. 61
  61. 61. LINE MODERNIZATION, FEATURING, AND PRUNING  Modernization—happens continuously in ahsanullah mohsen rapidly changing product markets.(improvements to encourage customer migration to higher valued, higher priced items.)  Featuring—used to boost demand for slower sellers.  Pruning(cutting)—identifying weak items through sales and cost analysis. opposite of line stretching. 62
  62. 62. PRODUCT MIX AND PRODUCT LINES ahsanullah mohsen 63
  63. 63. BRAND EQUITY ahsanullah mohsen Definitions: the commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself. “The tangible and intangible value that a brand provides positively or negatively to an organization, its products, its services, and its bottom-line derived from consumer knowledge, perceptions, and experiences with the brand.” Susan Gunelius This definition hits the three main points that define brand equity:  Tangible and intangible value: This can be tangible value such as revenues and price premiums or intangible value such as awareness and goodwill.  Positive or negative effects: The organization, products, services, and bottom line can benefit or suffer from brand equity.  Consumer catalysts: Brands are built by consumers, not companies. Therefore, brand equity is built by consumers too. 64
  64. 64. BRAND EQUITY Means brand power in market place  the unique set of brand assets & liabilities that is linked to a brand.  Some brands enjoy a high degree of brands preference i.e. they are selected over others.  Few brands command brand loyalty i.e. if the brand is not available at one store they would go to another store for it, without buying a substitute product.  ahsanullah mohsen 65
  65. 65. PRODUCT DIFFERENTIATION Products can be differentiated on the basis of a number of different product or service dimensions such as product features, performance, conformance durability, reliability, style & design.  There are two conditions for differentiation to exceed :(i) differentiation should be perceptible (ii) Should be rooted in competitive advantage ahsanullah mohsen Definition: Development or incorporation of aspects (such as benefits, price, quality, styling, service, etc.) that A product's intended customers perceive to be different and desirable. Advertising and promotion of a product is based on its differentiating characteristics. 66
  66. 66. DIFFERENTIATED PRODUCTS These products have a distinct identity  The manufacturer has some control over the price  It need not sell for the same price as the competitor’s price  Keys to success are product characteristics  Entry very difficult  ahsanullah mohsen 67
  67. 67. PRODUCT PLANNING To carry out the responsibilities, marketing managers follow a marketing process & the product managers come up with a marketing plan for individual product lines, brands, channels or customer groups. Each product level must develop a marketing plan for achieving its goals.  A marketing plan is a written document that summarizes what the marketer has learned about the market place & indicates how the firm plans to reach its marketing objectives.  ahsanullah mohsen 68
  68. 68. CONTENTS OF MARKETING PLANS (b) Situation Analysis : is relevant background data on sales, costs the market, competitors & various forces in the macro environment. All this information is used to carry out SWOT Analysis. ahsanullah mohsen (a) Executive Summary & Table of Contents : The marketing plan should open with a brief summary of the main goals & recommendations. A table of contents outlines the rest of the plan & all the supporting & operational details. (c) Marketing Strategy : Here, the product manager defines the mission & marketing & financial objectives. The manager also defines those groups & needs that the market offerings are intended to satisfy. 69
  69. 69. (e) Implementation Control: outlines the controls for monitoring & adjusting implementation of the plan. ahsanullah mohsen (d) Financial Projections: include a sales forecast, an expense forecast & a break even analysis on the revenue side, the projections show the forecasted sales volume by month & product category. On the expense side, the projections show the expected costs of marketing. 70
  70. 70. CHAPTER NO. 5 PRICING Pricing is the process of determining what a company will receive in exchange for its product.  Traditionally, price has been the major determinant of a buyer’s choice & is the only element in the marketing mix that generates revenue.  mistakes in pricing seriously affects the firm, its profits, growth & future.  ahsanullah mohsen 71
  71. 71. FACTORS INFLUENCING PRICING There are internal as well as external factors that affect pricing : Internal factors: (i) Corporate & marketing objectives of the firm.  (iii) The characteristic of the product (iv) Price elasticity of demand of the product. (v) Stage of product in its life cycle. ahsanullah mohsen (ii) The image sought by the firm through pricing (vi) Use pattern & turnaround rate of the product. (vii) Cost of manufacturing & marketing (viii) Extent of differentiation practiced (ix) Other elements of the marketing mix & their interaction with pricing (x) Composition of the product line of the firm. 72
  72. 72. EXTERNAL FACTORS : ahsanullah mohsen (i) Market characteristics (relative to demand, customer & competition) (ii) Buyer behavior in respect of the product (iii) Bargaining power of major customers (iv) Bargaining power of major suppliers (v) Competitor’s pricing policy (vi) Government controls / regulation on pricing (vii) Other relevant legal aspects (viii) Societal consideration. 73
  73. 73. PRICING OBJECTIVES ahsanullah mohsen (i) Profit maximization in the short term. (ii) Profit optimization in the long term. (iii) A minimum return on investment (iv) A minimum return on sales turnover. (v) Achieving a particular sales volume. (vi) Achieving a particular market share. (vii) Deeper penetration of the market. (viii) Entering new markets. (ix) Target project on the entire product line. (x) Keeping competition out, or keeping it under check. (xi) Keeping similarity with competition. (xii) Fast turn around & early cash recovery. (xiii) Stabilizing price & margins in the market. (xiv) Providing the commodities at prices affordable by weaker section. (xv) Providing the commodities at prices that will stimulate economic development. 74
  74. 74. METHODS OF PRICING OR PRICING STRATEGIES Cost Based Pricing : • Mark Up Pricing: cost plus margin • Absorption Cost Pricing: rests on the estimated unit cost of the product. Each indirect cost will be treated separately and allocated accordingly. • Target Rate of Return Pricing: a specific percentage is targeted in advance like 5% or is a rational approach to arrive at the mark up • Marginal Cost Pricing: setting the price of a product to equal the extra cost of producing an extra unit of output. It aims at maximizing the contribution towards fixed costs. (1) ahsanullah mohsen 75
  75. 75. ahsanullah mohsen (2) Demand Based Pricing : • What the Traffic can Bear’ Pricing: the maximum price that the customers are willing to pay • Skimming Pricing: high price & high profits in the early stage of marketing the product. • Penetration Pricing: seeks to achieve greater market penetration through relatively low price. (3) Competition Oriented Pricing: • Premium Pricing: above the level adopted by competitors. • Discount Pricing : lower than competitors • Parity Pricing: equal with competitors 76
  76. 76. (4) Value Pricing: Value pricing rests on the idea that the purpose of pricing is not to recover costs, but to capture the value of the product perceived by the customer. ahsanullah mohsen the following situation are possible with the cost value price chain. • Value > Price > Costs • Price > Value > Costs • Price > Costs > Value • Price = Value > Costs 77
  77. 77. ahsanullah mohsen (5) Product Line Pricing: When a firm markets a variety of products grouped into suitable product lines, a special possibility in pricing arises. As the product in a given product line are related to each other, sales of one influence that of the others. They also have interrelated costs of manufacturing & distribution. It can fix the prices of the different product in such a manner that the product line as a whole is priced optimally, resulting in optimal sales of all the products put together & optimal total profits from the line. 78
  78. 78. ahsanullah mohsen (6) Tender Pricing: Business firms are often required to fix the prices of their products on a tender basis.( small ads on newspaper) (7) Affordability Based Pricing: Idea here is to set prices in such a way that all sections of the population are in a position to buy & consume the products to the required extent. (8) Differentiated pricing: different prices for the same product in different zones/ areas of the market. 79
  79. 79. ahsanullah mohsen STEPS INVOLVED IN PRICING PROCEDURE (i) Identify the target customer segments & draw up the profiles. (ii) Decide the market position & price image that the firm desires for the brand. (iii) Determine the extent of price elasticity of demand of the product & the extent of price sensitivity of target customer groups. (iv) Take into account the life cycle stage of the product. Analyze competitions prices. (v) Analyze, other environmental factors. (vi) Choose the pricing methods to be adopted taking all the above factors into account. (vii) Select the final price. (viii) Periodically review the pricing method as well as 80 procedure.
  80. 80. ahsanullah mohsen 81