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MBA IB 6102: MARKETING MANAGEMENT
ASSIGNMENT TOPIC:- PRICING POLICY AND STRATEGIES
SUBMITTED TO:-
Dr. B B Goyal
Professor
UBS, Panjab University
SUBMITTED BY:-
DEEPAK KANWAL
MBA IB (2017-19)
PRICING POLICY AND STRATEGIES
SUBMITTED TO:-
Dr. B B Goyal
Professor
UBS, Panjab University
SUBMITTED BY:-
DEEPAK KANWAL
MBA IB (2017-19)
MBA IB 6102: MARKETING MANAGEMENT
Pricing policy
 Price: It is the quantity of payment or compensation given by one party to another in
return for goods or services.
 The price of a product may be seen as a financial expression of the value of that
product.
Pricing policy: It is the policy of a company or business that guides the price setting of
its good and services that are offered for sale.
In setting prices, the business will take into account the price at which it could acquire
the goods, the manufacturing cost, the market place, competition, market condition,
brand, and quality of product.
Pricing Objectives
• Profit maximization
• Satisfactory profits
• Target return on investment
Profit
oriented
• Market share
• Sales maximization
Sales
oriented
• Maintain existing prices
• Meet competition’s price
Status-quo
oriented
Factor influencing Pricing policy
Fixed &
variable cost
Competition
Business
objective
Target group
& willingness
to pay
Positioning
Common Pricing policies
 One price policy: offers the same price to all customers who purchase products under
the same conditions and in the same quantities. Most companies use a one-price policy
because it makes pricing easier and customers like it.
 Flexible price policy: offers the same product and quantities to different customers at
different prices. For example, grocery stores might give frequent-shoppers discount
prices. Flexible pricing has become easier because companies now have access to
databases that keep track of different price scales.
Pricing Strategy
 Pricing strategy in marketing is the pursuit of identifying the optimum price
for a product.
A pricing strategy takes into account segments, ability to pay, market
conditions, competitor actions, trade margins and input costs, amongst others.
It is targeted at the defined customers and against competitors.
Types of Pricing strategies
Penetration
pricing
Skimming
Pricing
Competitive
Pricing
Economy
Pricing
Bundle Pricing
Discount
Pricing
Discriminatory
Pricing
Prestige
Pricing
Full cost
Pricing
Penetration Pricing
 Penetration pricing is a pricing strategy where the price of a product is initially set low to
rapidly reach a wide fraction of the market and initiate word of mouth.
This strategy is most often used businesses
wishing to enter a new market or build on a
relatively small market share.
An example of penetration pricing would be
Amazon's Kindle Fire. They offered their
tablet for much cheaper than any of the
other tablets on the market.
Skimming Pricing
 The practice of ‘price skimming’ involves charging a relatively high price for a short
time where a new, innovative, or much improved product is launched onto a market.
 The objective of skimming is to “skim” off customers who are willing to pay more to
have the product sooner; prices are lowered later when demand from the “early
adopters” falls.
 High prices can be enjoyed in the short term where demand is
relatively inelastic. In the short term the supplier benefits from
‘monopoly profits’, but as profitability increases, competing
suppliers are likely to be attracted to the market.
Competitive pricing
 Competitive pricing is setting the price of a product or service based on what the competition
is charging.
 This pricing method is used more often by businesses selling similar products, since services
can vary from business to business, while the attributes of a product remain similar.
 In order to grab market share, Pepsi generally start to drop prices, and shortly after, Coca Cola
decide to decrease theirs slightly but not for all products.
Economy Pricing
 A valuation technique which assigns a low price to selected products.
 Economy pricing is widely used in the retail food business for groceries such as canned and
frozen goods sold under generic food brands where marketing and production costs have been
kept to a minimum.
Bundle Pricing
 In a bundle pricing, companies sell a package or set of goods or services for a lower price than
they would charge if the customer bought all of them separately.
 Common examples include option packages on new cars, value meals at restaurants and cable
TV channel plans.
 Pursuing a bundle pricing strategy allows you to increase your profit by giving customers a
discount.
Discount Pricing
 Businesses use discount pricing to sell low-priced products in high quantities. With this
strategy, it is important to cut costs and stay competitive.
 Large retailers are able to demand price discounts from suppliers and make a discount pricing
strategy effective.
 Occasional discounts and discounts that reward loyal
customers are effective.
 Discounts used too often begin a downward pricing
spiral that may eventually damage your ability to sell
the product at full price.
Discriminatory Pricing
 Price discrimination is a pricing strategy that charges customers different prices for the same
product or service.
 In pure price discrimination, the seller charges each customer the maximum price that he is
willing to pay.
 Consumers buying airline tickets several months in advance typically pay less than consumers
purchasing at the last minute. When demand for a particular flight is high, airlines raise the
prices of available tickets.
Prestige Pricing
 Marketing strategy where prices are set higher than normal because lower prices will hurt
instead of helping sales, such as for high-end perfumes, jewellery, clothing, cars, etc. Also called
image pricing.
 Prestige pricing has a direct correlation with the brand and the perception of the customers
over the image of the company.
Full Cost Pricing
 Full cost plus pricing is a price-setting method under which you add together the direct
material cost, direct labour cost, selling and administrative costs, and overhead costs for a
product, and add to it a mark-up percentage (to create a profit margin) in order to derive the
price of the product.
 This method is most commonly used in situations where products and services are provided
based on the specific requirements of the customer; thus, there is reduced competitive pressure
and no standardized product being provided.
The method may also be used to set long-term prices that are sufficiently high to ensure a
profit after all costs have been incurred.
Pricing policies & strategies

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Pricing policies & strategies

  • 1. MBA IB 6102: MARKETING MANAGEMENT ASSIGNMENT TOPIC:- PRICING POLICY AND STRATEGIES SUBMITTED TO:- Dr. B B Goyal Professor UBS, Panjab University SUBMITTED BY:- DEEPAK KANWAL MBA IB (2017-19) PRICING POLICY AND STRATEGIES SUBMITTED TO:- Dr. B B Goyal Professor UBS, Panjab University SUBMITTED BY:- DEEPAK KANWAL MBA IB (2017-19) MBA IB 6102: MARKETING MANAGEMENT
  • 2. Pricing policy  Price: It is the quantity of payment or compensation given by one party to another in return for goods or services.  The price of a product may be seen as a financial expression of the value of that product. Pricing policy: It is the policy of a company or business that guides the price setting of its good and services that are offered for sale. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the market place, competition, market condition, brand, and quality of product.
  • 3. Pricing Objectives • Profit maximization • Satisfactory profits • Target return on investment Profit oriented • Market share • Sales maximization Sales oriented • Maintain existing prices • Meet competition’s price Status-quo oriented
  • 4. Factor influencing Pricing policy Fixed & variable cost Competition Business objective Target group & willingness to pay Positioning
  • 5. Common Pricing policies  One price policy: offers the same price to all customers who purchase products under the same conditions and in the same quantities. Most companies use a one-price policy because it makes pricing easier and customers like it.  Flexible price policy: offers the same product and quantities to different customers at different prices. For example, grocery stores might give frequent-shoppers discount prices. Flexible pricing has become easier because companies now have access to databases that keep track of different price scales.
  • 6. Pricing Strategy  Pricing strategy in marketing is the pursuit of identifying the optimum price for a product. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.
  • 7. Types of Pricing strategies Penetration pricing Skimming Pricing Competitive Pricing Economy Pricing Bundle Pricing Discount Pricing Discriminatory Pricing Prestige Pricing Full cost Pricing
  • 8. Penetration Pricing  Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. This strategy is most often used businesses wishing to enter a new market or build on a relatively small market share. An example of penetration pricing would be Amazon's Kindle Fire. They offered their tablet for much cheaper than any of the other tablets on the market.
  • 9. Skimming Pricing  The practice of ‘price skimming’ involves charging a relatively high price for a short time where a new, innovative, or much improved product is launched onto a market.  The objective of skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls.  High prices can be enjoyed in the short term where demand is relatively inelastic. In the short term the supplier benefits from ‘monopoly profits’, but as profitability increases, competing suppliers are likely to be attracted to the market.
  • 10. Competitive pricing  Competitive pricing is setting the price of a product or service based on what the competition is charging.  This pricing method is used more often by businesses selling similar products, since services can vary from business to business, while the attributes of a product remain similar.  In order to grab market share, Pepsi generally start to drop prices, and shortly after, Coca Cola decide to decrease theirs slightly but not for all products.
  • 11. Economy Pricing  A valuation technique which assigns a low price to selected products.  Economy pricing is widely used in the retail food business for groceries such as canned and frozen goods sold under generic food brands where marketing and production costs have been kept to a minimum.
  • 12. Bundle Pricing  In a bundle pricing, companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately.  Common examples include option packages on new cars, value meals at restaurants and cable TV channel plans.  Pursuing a bundle pricing strategy allows you to increase your profit by giving customers a discount.
  • 13. Discount Pricing  Businesses use discount pricing to sell low-priced products in high quantities. With this strategy, it is important to cut costs and stay competitive.  Large retailers are able to demand price discounts from suppliers and make a discount pricing strategy effective.  Occasional discounts and discounts that reward loyal customers are effective.  Discounts used too often begin a downward pricing spiral that may eventually damage your ability to sell the product at full price.
  • 14. Discriminatory Pricing  Price discrimination is a pricing strategy that charges customers different prices for the same product or service.  In pure price discrimination, the seller charges each customer the maximum price that he is willing to pay.  Consumers buying airline tickets several months in advance typically pay less than consumers purchasing at the last minute. When demand for a particular flight is high, airlines raise the prices of available tickets.
  • 15. Prestige Pricing  Marketing strategy where prices are set higher than normal because lower prices will hurt instead of helping sales, such as for high-end perfumes, jewellery, clothing, cars, etc. Also called image pricing.  Prestige pricing has a direct correlation with the brand and the perception of the customers over the image of the company.
  • 16. Full Cost Pricing  Full cost plus pricing is a price-setting method under which you add together the direct material cost, direct labour cost, selling and administrative costs, and overhead costs for a product, and add to it a mark-up percentage (to create a profit margin) in order to derive the price of the product.  This method is most commonly used in situations where products and services are provided based on the specific requirements of the customer; thus, there is reduced competitive pressure and no standardized product being provided. The method may also be used to set long-term prices that are sufficiently high to ensure a profit after all costs have been incurred.