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Pricing Strategy



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Pricing Strategy

  2. 2. WHAT IS PRICE?  Price is a value that will purchase a finite quantity, weight or other measure of good or service.  It is determined by what (1) a buyer is willing to pay (2) a seller is willing to accept, (3) the competition is allowing to be charged.
  3. 3. WHAT IS PRICING?  Pricing is the marketing activity involved with capturing or “harvesting” the value created by the other types of marketing such as product, distribution and promotion.
  5. 5. FACTORS AFFECTING PRICE DETERMINATION(contd.) Internal factors 1. Cost (what introductory prices should be kept considering demand and competition in market) 2. Survival price (what price should be kept to attract customers during downfall) 3. Profit (primary objective of a firm) 4. Market share (flexible prices) 5. Product quality (add on values constantly)
  6. 6. FACTORS AFFECTING PRICE DETERMINATION (contd.) External factors 1. Customers (nature and behavior) 2. Government agencies (pricing policy and legal policy) 3. Suppliers (price of raw materials) 4. Channels (direct and indirect channels) 5. Competitors (fix the price less, same or greater than others)
  7. 7. PRICING STRATEGIES 1. Competitive pricing (pricing based on competitors’ price) 2. Good, better, best pricing (same product offered in different formats at different times) 3. Loss leader (lower prices to attract customers) 4. Multiple pricing (offering slight discount on products in greater quantities) 5. Optional product pricing (spend a little extra on product by adding on extra features)
  8. 8. PRICING STRATEGIES(contd.) 6. Penetration pricing (keeping the price lower of a newly launched product) 7. Premium pricing (product is of high quality but will be sold in small quantities) 8. Product bundle pricing (group several products together for sale) 9. Product line pricing (range of complementary products packaged together) 10. Skim pricing (place higher prices but gradually lower price)
  9. 9. PRICING METHODS 1. Cost plus pricing (set the price at production cost, including both cost of goods and fixed costs at current volume) 2. Target return pricing (set the price to achieve a target return-on-investment) 3. Value based pricing (price product based on the value it creates for the customer) 4. Psychological pricing (take into consideration the consumer’s perception of price)