PRICING The only part of marketing mix that is revenue generating all the others are cost Pricing is the process of determining what a company will receive in exchange for its products .
SETTING THE PRICE1. Selecting objective2. Determining demand3. Estimating costs4. Analyzing competitors cost,price and offers5. Selecting a pricing method6. Selecting final price
STEP.1 – SELECTING PRICING OBJECTIVE Survival :-Short term pricing objective are set in order to survive Profit :- The objective is to maximise profit Return on investment :-Price are set to attain a specified return on the companies investment Maximum market share :- Higher sales volume will lead to lower unit costs and higher long-run profit. They set the lowest price (IKEA) Maximum market skimming :- companies unveiling a new technology favour setting high price to maximise market skimming .price starts high and slowly rollback Product quality leadership :- Starbucks , CCD, BMW , Mercedes,Taj have positioned as leaders in quality , with premium pricing and very loyal customer base
STEP.2 - DETERMINING DEMAND Each price will lead to a different impact on a company’s marketing objectiveInelastic Demand:-the situation in which the supply and demand for a good are unaffected when the price of that good or service changes. Inelastic Demand : demand fora product is sensitive to pricechanges
ESTIMATING COST Fixed cost : salaries, rent ,intrest Variable cost : vary directly with the level of production. Total cost : Fixed + Variable cost Average cost : Cost per unit .
ANALYZING COMPETITORS COST,PRICE ANDOFFERS The firm must take competitors cost , price , and possible price reactions .
FIXING THE PRICING The price of the product should be determined in such a way as to give a fair return to the producer, a good margin to the middlemen and a reasonable price to the consumer .
PREMIUM PRICING Use a high price where there is a unique brand. This approach is used where a substantial competitive advantage exists and the marketer is safe in the knowledge that they can charge a relatively higher price
SKIMMING A very high price is fixed by a company for a new product Earn max profit at earliest Deliberate to built up the image of quality and prestige of the product . Only for specialty goods No competition , if yes then showing competitive advtage
BAIT Two products are manufactured by a firm, and the price of one product is kept low and the price of the other product is kept high . Selling high price product by showing the low price Eg : Car, Fast food , Computers
PSYCHOLOGICAL PRICING. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example Price Point Perspective (PPP) 0.99 Paise not 1 rupee. Eg:- Bata
PRODUCT LINE PRICING. Different products of different prices are manufactured , but the price of all the product are determined in a line Say as :- 25,35, 40 etc
OPTIONAL PRODUCT PRICING Companies will attempt to increase the amount customers spend once they start to buy. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.
PROMOTIONAL PRICING. Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free), money off vouchers and discount
PRODUCT BUNDLE PRICING. Here sellers combine several products in the same package. his also serves to move old stock. Blu-ray and videogames are often sold using the bundle approach once they reach the end of their product life cycle.
GEOGRAPHICAL PRICING. Geographical pricing sees variations in price in different parts of the world. shipping costs increase price n some countries there is more tax on certain types of product which makes them more or less expensive
VALUE PRICING This approach is used where external factors such as recession or increased competition force companies to provide value products and services to retain sales e.g. value meals at McDonalds and other fast-food restaurants. http://www.youtube.com/watch?v=LX7gfhv2o 5U
PENETRATION PRICING The price charged for products and services is set artificially low in order to gain market share. http://www.youtube.com/watch?v=EPYOlJ9t BHM
ECONOMIC PRICING This is a no frills low price. The costs of marketing and promoting a product are kept to a minimum. Budget airlines are famous for keeping their overheads as low as possible and then giving the consumer a relatively lower price to fill an aircraft. The first few seats are sold at a very cheap price (almost a promotional price) and the middle majority are economy seats, with the highest price being paid for the last few seats on a flight (which would be a premium pricing strategy). http://www.youtube.com/watch?v=jmNrvlQ73pU
CHANGING PRICING ENVIRONMENT Buyers can : Get instant price comparison from thousand of vendors (Eg: mysimon.com, flipcart,pricescan.com) Name there price and have it met (priceline.com) Get products free : Free software movement that started
FREEMIUM STRATEGY My space Skype Adobe gave away PDF reader for free in 1994
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