Pricing Strategy

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This following presentation defines Pricing Strategy; A Cost-Based Price Strategy, price set up by calculate production cost, promotion cost, and overhead cost, then adding the desired profit to those calculation. A Demand-Based Price Strategy, price set up after analyzing consumer desires and determines the range of prices acceptable to the target market. A Competition-Based Price Strategy, the marketer sets prices in accordance with competitors.

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Pricing Strategy

  1. 1. Pricing Strategy
  2. 2. You can download this presentation at: http:// freepresentation.org Please visit F reePresentation. org for more presentations on marketing, strategy and case solution
  3. 3. Three Primary Consideration Price Elasticity Demographic Factors Psychological Factors
  4. 4. <ul><li>Number of potential buyers, and their age, education, and gender. </li></ul><ul><li>Location of potential buyers </li></ul><ul><li>Position of potential buyers </li></ul><ul><li>Expected consumption rates of potential buyers </li></ul><ul><li>Economic strength of potential buyers </li></ul>Demographic Factors
  5. 5. <ul><li>Related to pricing concern primarily how consumers will perceive various prices or price changes. </li></ul><ul><ul><ul><li>Will potential buyers use price as an indicator of product quality? </li></ul></ul></ul><ul><ul><ul><li>Will potential buyers be favorably attracted by odd pricing? </li></ul></ul></ul><ul><ul><ul><li>Will potential buyers perceive the price as too high relative to the service the product gives them? </li></ul></ul></ul><ul><ul><ul><li>Are potential buyers prestige oriented and therefore willing to pay higher prices to fulfill this needs? </li></ul></ul></ul><ul><ul><ul><li>How much will potential buyers be willing o pay for the product? </li></ul></ul></ul>Psychological Factors
  6. 6. <ul><li>Both demographic and psychological factors affect price elasticity. Price elasticity is a measure of consumers’ price elasticity: </li></ul><ul><li> e= % in demand / % in price </li></ul><ul><li>Although difficult to measure, there are two basic methods commonly used to estimate price elasticity. </li></ul><ul><ul><li>Estimated from historical data or from price/quantity data across different sales district. </li></ul></ul><ul><ul><li>Estimated by sampling a group of consumers from the target market and polling them concerning various price/quantity relationship. </li></ul></ul>Price Elasticity
  7. 7. Pricing Objectives Pricing to achieve a target return on investment Stabilization of price and margin Pricing to achieve a target market share Pricing to meet or prevent competition
  8. 8. <ul><li>Number of competitors </li></ul><ul><li>Size of competitors </li></ul><ul><li>Location of competitors </li></ul><ul><li>Condition of entry into the industry </li></ul><ul><li>Degree of vertical integration of competitors </li></ul><ul><li>Number of products sold by competitors </li></ul><ul><li>Cost structure of competitors </li></ul><ul><li>Historical reaction of competitors to prices changes </li></ul>Pricing Set Up Consideration
  9. 9. Pricing Strategies Premium Pricing Economic Penetration Pricing Skimming Pricing Low High Low High Quality Price
  10. 10. <ul><li>Economic </li></ul><ul><ul><li>Low price  low quality </li></ul></ul><ul><li>Penetration Pricing </li></ul><ul><ul><li>Offer low price to gain market share, usually in fast moving consumers good </li></ul></ul><ul><li>Skimming Pricing </li></ul><ul><ul><li>During introduction of products or because the limit of distributions channel </li></ul></ul><ul><li>Premium Pricing </li></ul><ul><ul><li>Branded product, prestige product  high quality and high price </li></ul></ul>Pricing Strategies
  11. 11. <ul><li>A Cost-Based Price Strategy </li></ul><ul><ul><li>Price set up by calculate production cost, promotion cost, and overhead cost, then adding the desired profit to those calculation. </li></ul></ul><ul><li>A Demand-Based Price Strategy </li></ul><ul><ul><li>Price set up after analyzing consumer desires and determines the range of prices acceptable to the target market. </li></ul></ul><ul><li>A Competition-Based Price Strategy </li></ul><ul><ul><li>The marketer sets prices in accordance with competitors. </li></ul></ul>Pricing Strategies
  12. 12. A General Pricing Model Set price objectives Evaluate product- price relationship Set initial price structure Analyze profit potential Estimate costs and other price limitation Change price as needed
  13. 13. Thank You

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