Based on Chapter 13 of Marketing Management : An Indian Perspective by Kotler, Keller.

1. How should a company set prices
initially for products and services?

2. By,
Anurag Kar
B.Tech. Student
Department of E and ECE
IIT Kharagpur
Based on Chapter 3: Developing Pricing
Strategies and Programs
Of
Marketing Management: A South Asian
Perspective
By Kotler, Keller, Koshy and Jha

3. Firms must set a price
when they develop a new product.

4. There are
for firms to follow
in setting up their pricing policy.

5. Selecting the Pricing
Objective

6. There are
5
MAJOR OBJECTIVES

7. 5
Major
Objectives
SURVIVAL
Maximum
Profit
Maximum
Market Share
Maximum
Market Skimming
Product Quality
Leadership

8. 1. Partial Cost Recovery (universities)
2. Full Cose Recovery (non-profit hospitals)
3. Fill Maximum Seats (non-profit theatres)
Other Objectives

9. Determining Demand

10. Demand Curves

11. Demand Curves show the
market’s probable purchase
quantity at different prices.

12. Price Sensitivity is how quickly
the demand decreases with an
increase in price.
Ideally companies want low price
sensitivity.

13. Price Elasticity
is how responsive
the demand is to a change
in price.

14. In both the graphs, the price reduction is $5 but…
Graph (a) has an increased demand of 5 units.
Graph (b) has an increased demand of 100 units.

17. Ways to
Estimate
Demand Curves
Surveys
Price
Experiments
Statistical
Analysis

18. Estimating Costs

19. Types of Costs
Overhead
Costs
Costs that do not vary
with production levels.

20. Types of Costs Variable
Costs
Costs that vary
directly with
production levels.

21. Types of Costs
Total
Costs
Sum of the fixed and
variable costs.

22. Types of Costs
Average
Costs
Cost per unit at a
particular level of
production.

23. Types of Costs
Overhead
Costs
Variable
Costs
Total
Costs
Average
Costs

24. Accumulated Production
is the phenomenon of decreasing
cost per unit with increasing
production experience.

25. As the accumulated production (and hence
production experience) increases, the cost
per unit decreases.

26. Analysing Competitors’
Costs, Prices and Offers

27. Accumulated ProductionFirms have to take competitors’…

28. Accumulated ProductionFirms have to take competitors’…
Prices
Costs
Possible
Price Reactions

29. Accumulated ProductionFirms have to take competitors’…
Prices
Costs
Possible
Price Reactions
Into account

30. And formulate
their pricing policies
accordingly…

31. Selecting a Pricing
Method

32. T y p e s o f P r i c i n g
M e t h o d s
Target Return
Pricing
Perceived Value
Pricing
Markup
Pricing
Going Rate
Pricing
Value PricingAuction Pricing

33. Markup Pricing
A standard markup is added to the
product’s cost and the price is decided.
Most elementary form of pricing.

34. Target Return Pricing
The firm determines the price
that yields it’s target rate of
return on investment.

35. Perceived Value Pricing
Prices based on
customers’ perceived
value of the product.
Perceived value depends upon
buyer’s image of performance of
the product, the channel
deliverables, the warranty quality,
customer support, supplier’s
reputation, trustworthiness and
esteem.

36. Value Pricing
Winning loyal customers by
charging a fairly low price for a
high quality offering.

37. Going Rate Pricing
Prices based on competitors’
prices.

38. Auction Type Pricing
3 Types
English Auctions
(ascending bids)
Dutch Auctions
(descending bids)
Sealed bid
Auctions

39. Selecting the Final
Price

40. Impact of other
Marketing Activities
Company Pricing
Policies
Gain and Risk
Sharing Policies
Impact of Price on
other parties
Before setting the final
price
Certain additional factors
have to be considered.

41. The Company is
now ready to set
its prices!

42. Recap

45. Pictures Sourced from:
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http://commons.wikimedia.org
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Fonts Sourced from:
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Based on “Marketing Management: A South Asian Perspective”
By Kohler, Kelter, Koshy and Jha
Credits