How To Choose The Right Price For Your Product Or Service PowerPoint Presentation Slides

How to Choose the
Right Price for Your
Product or Service
Your Company Name

TableofContent
01
02
03
04
05
06
07
08
09
Two Broad Factors
Influencing Pricing
Price-taker or Price-setter?
Pricing Strategies
‣ Premium Pricing
‣ Penetration Pricing
‣ Economy Pricing
‣ Price Skimming
‣ Psychology Pricing
‣ Bundle Pricing
‣ Cost-based Pricing
‣ Value-based Pricing
‣ Promotional Pricing
‣ Anchor Pricing
‣ Loss Leader Pricing
‣ Other Pricing Strategies
The Law of Demand
Subscription Pricing Model
Dynamic Pricing Model
Pricing Options
Pricing Strategy – Steps to Follow
Three-tier Pricing Strategy
‣ Three-tier Pricing Strategy Example
‣ How a three-tier pricing strategy works

TwoBroadFactorsInfluencingPricing
Competitive Dynamics ‣ What are competitors charging for similar product or service?
Functional Benefits
Works
better
Saves you
money
Helps your
family
Stay
connected
Helps you to
be healthier
Simplifies
your life
Makes you
smarter
Sensory
appeal
Experience
Feel
optimistic
Get
noticed
Feel
free
Stay in
control
Feel
liked
Feel
comfortable
Sensory
appeal
Curious for
knowledge
Emotional Benefits
Customer Benefits – Product Cost = Value
Value Proposition ‣ How valuable your customers find your product?
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Price-takerorPrice-setter? Price- taker
Product lacks uniqueness
Intense competition
Pricing approach
emphasizes target pricing
Price- setter
Product is more unique
Less competition
Pricing approach emphasizes
cost- plus pricing
Characteristics
Examples: Examples:
‣ Food commodities
‣ Natural resources
‣ Generic consumer products &
services
‣ Latest tech gadget
‣ Specially manufactured machinery
‣ Original art, jewelry
‣ Patented perfume scents

PricingStrategies
Types of
PRICING STRATEGIES
‣ Premium Pricing
‣ Economy Pricing
‣ Psychology Pricing
‣ Penetration Pricing
‣ Price Skimming
‣ Anchor Pricing
‣ Bundle Pricing
‣ Value Pricing
‣ Promotional Pricing
‣ Cost based Pricing
‣ Loss Leader Pricing

PremiumPricing
Quality
Product
Suitable for companies that have a competitive advantage or sell
unique product or service
Suitable in those markets where customers would be willing to pay more for getting a
stronger sense of self-esteem. Higher prices are naturally associated with premium
quality or service.
Ideal in situations when there are no substitute products
The product quality or service should, however, look
and feel superior for this strategy to work
Can be applied when a small company for example cannot
increase profits by increasing the volume of goods. Example- A
clothing brand with customized designs.
Well-established brands increasingly using this strategy by rolling out products
for the premium segment. Example, car manufacturing brands rolling out
models with premium features and look at a premium cost.
The strategy of setting prices higher than the competitors to showcase
PREMIUM QUALITY

PenetrationPricing
PROS
CONS
‣ Setting low prices can be a marketing
tool raising brand awareness
‣ A quick way to gain market share & enter
a competitive industry
‣ It enables a firm to benefit from
economies of scale
‣ Overtime, prices can increase & the firm
become more profitable
‣ It might involve selling at a loss for first
few months
‣ It is risky – if consumers have brand
loyalty then may not switch – despite low
prices
‣ A firm needs to gear up with high output
straight from the start
‣ It might start a price war with existing
firms cutting prices to discourage entry
‣ An effective strategy for new products and services to increase awareness about the product.
‣ The lower prices may lead to initial losses but proves to be profitable in the long run
‣ Once the brand is established successfully, the company can raise prices. The market base loyal to your product will continue to
be your customers.
The strategy to lower prices to penetrate the market and establish oneself
Penetration
Pricing

EconomyPricing
The strategy of assigning a low cost to selected products
Example- Generic food items sold at grocery stores. Though a small profit is made on each item, the high
volume of the products compensate. Therefore, this is not the strategy for small businesses that do not
have high volume production.
Another example is economy pricing for the first few airline seats.
Generally, applied on products that have little marketing and promotion expenses.

PriceSkimming
PROS CONS
Firms can increase profit & enable
more research
Consumers who pay high price may
feel ripped off
Consumers who wait can benefit
from lower prices
Firm could lose market share if
prices are too high
High price can help recoup
investment costs of new product
It requires a degree of monopoly
power
For Example – iPhone uses Marketing Skimming
The strategy of selling a product at a higher price, sacrificing high sales to gain a high profit
‣ Usually applied on sales of new services or products
‣ High prices are set during the preliminary phase and are later lowered as competitors enter the market
‣ The high prices create an impression of exclusivity and premium quality when the product is first
launched in the market
EXAMPLE –
Electronic markets

PsychologyPricing
The strategy of setting the price slightly lower than rounded numbers to create an illusion of lower price and higher value.
Example, a $100 product is sold at $99
Psychology says consumers tend to pay more attention to the first digits on a price tag. You can see similar pricing tactic when retailers
add $0.99 on price tags such as $1.99 or $2.99. Hence, the aim of this strategy is to create an illusion of greater customer value.
Based on the science of psychology. Scientifically proven that consumers tend to react positively to “odd prices”, such as $3.99 or
$169.99, as many consumers turn subconsciously to the lowest monetary value.
This psychological pricing approach is called ‘Charm Pricing’. The main idea of it is to reduce the left digit value of a rounded price by one
cent (e.g. from $3,00 to $2,99).
$20 $1999
Tactic Reduce the Left digit by One

BundlePricing
Refers to the strategy of offering certain products or services as a package, usually by setting a reduced price
‣ Example- Buy a multipack of chips at $2.99 rather than buy 1 packet $0.65
‣ A win-win for both customers and sellers as the seller gets to sell more units while the customer
gets the product at lower price.
‣ This strategy increases the value perception as the seller is essentially giving customers
something for free
Bundling is a policy commonly used by industries active in such areas as telecommunications,
finance, health care, insurance, consumer electronics and fast food services
Leader Bundling:
This technique is a combination of bundling approach and loss leader. Thus, in this model, the leader product or service is at a discount only if the
customer purchases it together with a non-leader one
‣ Mixed Leader: The consumer has the option of buying the entire package or some pieces of it
Pure Bundling:
It is when a specific package deal following a ‘take it as a whole or leave it’ approach. That means that a consumer must buy the
products together as a package.
‣ Joint Bundling: Appears when two products are offered jointly for a particular reduced price
Premium Bundling:
It is a widespread technique in which a group of products/services is combined, and the package price is higher than the sum of the prices of
individual products
VARIATIONS:

Cost-basedPricing
COST MARKUP % FINAL PRICE
Setting price on the basis of cost of manufacturing, distributing
and selling the product. To this, a reasonable rate of profit is
added to determine the final price
‣ Example- Say the cost of producing a laptop for the company
is $1000, and it has decided that the profit for the sale of the
notebook unit should be 20%. According to this model, the
final price of the product will be 1.20 times the cost price,
equal to $1200.
This method offers the advantage of being easy to implement as long as
costs are known. But one major disadvantage is that it does not take into
consideration the target market’s demand for the product
This could present major problems if the product is operating in a highly
competitive market where competitors frequently alter their prices

Value-basedPricing
Product Cost Price Value Customers
Customers Value Price Cost Product
COST-BASED PRICING
VALUE-BASED PRICING
Strategy of setting prices based on a consumer's perceived value of the product or service
The fashion industry is one of the most heavily influenced by value-based pricing. Typically, popular name-brand designers
command higher prices based on consumers' perceptions of how the brand affects their image.
‣ Also called “Customer-Based Pricing” because the pricing information depends on the customers
‣ Companies following this strategy have to carefully research their market and develop buyer personas
VALUE-BASED PRICING vs COST-BASED PRICING

PromotionalPricing
Loss Leaders
Are products sold below cost to attract customers in the hope they will buy other items at
normal markups
Special Event Pricing
Is used to attract customers during certain seasons or periods
Cash Rebates
Are given to consumers who buy products within a specified time
Low interest financing, Longer warrantees & Free maintenance
Lower the consumer’s “total price”
Strategy of setting prices temporarily below list price or cost to increase demand
‣ Can be seen in various departmental stores and restaurants etc.
‣ Approaches such as money off vouchers, BOGOF (Buy One Get One Free) and discounts are a part of this pricing strategy
SPECIAL OFFER
SALE
Buy 1
Get 1
UPTO
60% OFF

AnchorPricing
Strategy of establishing a price point which customers can refer to when making decisions
‣ Example- When Apple introduced iPad, it showed the price
at $999. Moments later, it was replaced by the actual price
of $499. This is anchor pricing strategy. It relies on cognitive
bias if users to rely heavily on the first piece of information
offered in an interaction. This initial information, or anchor,
establishes a frame of reference and decision makers base
their decisions around that anchor
‣ Offer a much better product (more offerings) and price it slightly above the basic version of the product. The customers
would naturally prefer the superior product as they are gaining much more by paying only slightly more
‣ Offer a valuable product at a cost much lesser than an expensive, premium product. The customers will buy the lesser
priced product as they will feel they are getting as good a deal as the premium product but at a much lesser price
Low price anchor
High price anchor
Example-
An electronics company prices a 50-inch flatscreen TV at $1000, and a 48-inch flatscreen TV at $600. Customers will tend to buy more of the 48-
inch TVs, since they can save $400 by buying a TV that’s only 2 inches smaller
A product is truly never "cheap" or "expensive"; it’s all relative. People love to compare when valuing products and having an anchor price allows them to
do that. It works in 2 ways- High price anchor and Low price anchor

LossLeaderPricing
Advantages Disadvantages
‣ The seller makes a larger profit
‣ Is a good form of advertisement
‣ Can be used to clear spare stock
‣ Great way for a company to enter into a new market and
persuade the targeted audience to give a shot on its products
or service.
‣ Great way to promote products that consumers will never buy
solely
‣ The seller might lose profit if not monitored
‣ By retaining a deep discount, the customer may receive the
impression that the product should always have a lower price
‣ If the price is unusually good, & for a necessary item the customer
might purchase the highest possible quality of the item
‣ Smart consumers might buy only the loss leader products without
buying anything more.
‣ Can damage your brand name if consumers connect your low
prices with lower quality
‣ If your loss leader pricing strategy is overused, it is possible to
educate your audience to wait patiently only for the periods that
you will implement your discounts
Strategy of selling goods/ services below cost deliberately to encourage sales elsewhere.
‘Loss leader products’, are used as baits to drive traffic into a store. For example, at Christmas, a supermarket sells bottles of gin for
$3 so that people are attracted to visit the store and end up buying other goods as well.
Purchase of other items covers the ‘loss’ on the loss-leader product.
Example- ‘Free’ mobile phone when taking on contract package, selling computer printers below cost so expensive ink
cartridges can be sold.

OtherPricingStrategies
It is a pricing method whereby merchandise is priced for
resale at an amount that is double the wholesale price or
cost of the product.
Keystone Pricing
A high-low pricing strategy is when a company initially sells a product at a
high price but lowers that price when the product drops in novelty or
relevance. E.g. Discounts, clearance sections, and year-end sales.
High-Low Pricing
When companies offer a basic version of their product
hoping that users will eventually pay to upgrade or access
more features.
Freemium Pricing
A pricing strategy followed by a seller whereby the seller prices a
product to maximize his or her profits under the assumption that he or
she does not need to worry about competition.
Monopoly Pricing

TheLawofDemand
There is an inverse relationship between
the price of a good and demand.
‣ As prices fall, we see an expansion of
demand.
‣ If price rises, there will be a contraction of
demand.
The Demand Curve
Quantity demanded
PriceofCoffee
P1
P2
P3
Q1 Q3Q2
Higher price leads to a contraction of
quantity demanded
Lower price leads to an expansion of
quantity demanded
Demand for Coffee

SubscriptionPricingModel
Pricing Maturity vs
Business Expansion
Multiple pricing options as business expands
Business Maturity
Complexity
Company Launch
‣ Single product
‣ Simple monthly pricing
Revenue Enhancement
‣ Product upgrades
‣ Billing frequencies
Product expansion
‣ Add- on products
‣ Product bundles
Pricing optimization
‣ Pricing tiers
‣ Usage + overages
‣ A/B testing
International growth
‣ Multiple currencies
‣ Regional pricing
FIXED RECURRING/ FLAT-RATE
Fixed price for a product, say $15 per month. Example- Amazon Prime
TIERED PRICING
With new offerings and updates, make multiple pricing packages such as
monthly, semi-annual, and annual. Most SaaS companies use this model.
UNIT/ USER MODEL
Charging the customer on the basis of number of users with access or
number of units used.
USAGE PRICING
Dynamic prices based on usage of the plan. Used by Cloud Services
companies.

DynamicPricingModel
Also known as surge pricing, demand pricing, or time-based pricing.
It’s a flexible pricing strategy where prices fluctuate based on market and customer demand
Dynamic Pricing
Profit
1
2
3
4
5
Revenue
Multiple Price Points
Revenue
Single Price Points
1
Static Pricing

PricingOptions
Maintain Price
‣ Maintaining the same price while
continuously improving the product
or service will retain customer
loyalty
‣ At your selling price, you should
have the best to offer to stay ahead
of the competition
Lower Price
‣ Lowering is a powerful strategy to attract
more customers
‣ It may lead to price wars with other brands
also lowering their prices
‣ The company with the best value proposition
stands to win
Increase Price
‣ Use it when you have an improvement in value
proposition that competitors can easily replicate
‣ Can be used by luxury brands to show superior
service
‣ Not effective when there is no improved value
proposition; in such a case the customers may
move to some other brand

Three-tierPricingStrategy
A three-tier pricing strategy is when you offer three different pricing choices for essentially the same service or product but with
different options which increases the value for each one.
BASIC PACKAGE
$
‣ Very basic work
‣ Affordable price will at least get
you in the door.
“This option is too
LITTLE.”
ADVANCED PACKAGE
$$
‣ This is the optimal amount of work
for them, & the optimal amount of
money for you.
“This option is
jussstt RIGHT!”
SUPER AWESOME
ROCKSTAR PACKAGE
$$$$$
‣ This is the Complete-Done-For-
You-Rockstart-Package that’s
super expensive.
“This option is too
HIGH.”

Three-tierPricingStrategyExample
Automobile manufacturers also use this strategy. Most cars are available in three models. A base model, a deluxe model, and a Luxury model. The deluxe
model — the one in the middle --- sells the most.
“BEST VALUE”
$ 4.99/MO
‣ Basic security
‣ Add text here
‣ Add text here
‣ Add text here
‣ Add text here
Buy
$ 9.99/MO
‣ 3 websites
‣ Advanced security
‣ Monthly backups
‣ SSL Certificate
‣ Add text here
Buy
$ 49.99/MO
‣ Unlimited websites
‣ Super advanced security
‣ Daily malware monitoring
‣ Daily backups
‣ Wildcard SSL Certificate
Buy
Tier 1
Tier 2
Tier 3

HowaThree-tierPricingStrategy
Works
Lower Price
‣ The price of this tier depends
on the price of Tier 2. Keep its
price lesser than anchor price.
‣ Drop some of the
benefits/features provided in
Tier 2.
‣ Many customers won’t choose
this package as they might
associate with low prestige.
Tier 01
Anchor Price
‣ This is your ideal proposal.
Figure out what price to set for
it.
‣ This package should be the
best value for the price.
‣ You might promote this
package as the “Most Popular”
amongst your users.
‣ Most customers go for this
package as it neither too cheap
nor too expensive.
Tier 02
Premium Price
‣ You set this price much higher
than anchor price with
maximum features and
benefits. The added features
and benefits are not usually
demanded by most customers.
‣ This is targeted at wealthy
customers. Few choose this
offer as it is heavy on the
pocket and the extra features
are not badly needed.
Tier 03
Why It Works
By introducing three pricing options, the customers feel more in control of their choice. This power makes them inclined to choose
one option as they feel they are not being forced to buy anything which they might feel in single pricing strategy.
‣ The customer also feels such pricing options are more transparent. He/she can see the value each package provides.
The customer can choose the package depending on his needs.
‣ It attracts all customer segments – the price sensitive, the best bargain choosers as well as spendthrifts.

PricingStrategy–StepstoFollow
Research Analyze Decide Implement
‣ Research how competitors
in your industry have set
prices
‣ Interview prospects & carry
out surveys to find their
buying preferences and
cost they are willing to pay
‣ Lay out the value you offer
– functional as well as
emotional benefits
‣ Analyze the strengths &
weaknesses of competitors’
pricing models
‣ Brainstorm to create different
pricing models depending on
your product and industry
‣ Analyze the interview and
survey results to find scope for
new pricing options that can
give you a competitive
advantage
‣ Narrow down to choose
two to three pricing
options for your product
or service
‣ Brainstorm with
management and
stakeholders to choose
the best pricing strategy
‣ Execute the final pricing
model and work with
sales and marketing team
to communicate the
pricing advantage to
customers
‣ Compare results with
previous years and
competitors to determine
the success of your
pricing strategy

HowtoChoosetheRightPriceforYourProductorService
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AdditionalSlides
Agenda Slide
Company Introduction
Our Mission Vision Values
Our Goals
Organization Chart
Comparison Slide
Bar Chart Template
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Pie Chart Template
Dashboard Template
Linear Diagram
Circular Diagram
Roadmap Template
Timeline Template
Thank You Slide
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ComparisonSlide
Smart Phone Users
Smart Computer Users
Smart Laptop Users
50%
30%
20%

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Product 05

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