all about pricing of produts

1. Pricing
Dharmendra Singh
MBA,NET,Ph.D
Mob:7870701208
drdksingh@gmail.com

2. Price
The sum of values that customer exchange for the benefit of
having or using the product
exchange value of the product
amount of money charged for the product
Features:
1.The only element in marketing mix that generates revenue,
others are cost centers.
2.Could be changed at short notice.
3.crucial to set the right price
*demand sets the ceiling
* cost sets the floor

3. Factors affecting pricing decision
Factors
Internal external
1.mktg objectives
2.Mktg mix strategy
3.Cost
4. Orgnl cosiderarion
*P-policy
*P-Strategy
Micro:
Mkt
Demand
comptn(CPO)
Reseller
Macro:
Economy
Govt
Social concern

4. Setting the price
1.Selecting the price objective
2.determining demand
3.estimating cost
4.Anlysing competitors
5.Selecting pricing method(P-policy)
6.Selecting the final price(P-strategy)
7.Review & revise

5. Selecting the Price objective
1.survival:Cover the VC & some FC (for short run)
2.Current profit:focus on demand & cost
fluctuation
3.current revenue:focus only on D-fluctuation
4.sales growth(mkt share): unit sales volume
5Leadership-cost or quality

6. Determining Demand
• Demand schedule is prepared to
assess the price elasticity of
Demand.
• The lesser elastic the D ( when
there are fewer substitute or
competitors) is the more it pays
when the price is raised

7. Estimating cost
In the short run,when the plant size is fixed, SRAC Curve is U
shaped.
The CPU ie AC continues to fall as output(Q) approaches to
optimal level since FC spreads over more units of output(Q)
In the long run when even the plant size is variable, it is
considered to be a locus of the tangential curve that
touches the lowest point of all the possible SRCC.The
economy of scale is attributed to the L shaped LRAC Curve.
The mkter needs to have a fair amount of idea regarding
the average cost at a given level of output
Target Costing:deciding the SP first affordable to TC & then
restricting the cost within limits that could yield a desired
level of profit.

8. Analysing competitors
The competitors’ cost, price & offers is
analysed to ensure that the price set for
the pdt is justifiable indeed and thereby
offers a superior value to the TC

9. selecting a pricing method
P can’t be set too low to produce a profit & too high
to produce a demand
The alternative basis for setting the P :
1.cost
2.customer
3.competitor

10. Cost based pricing
• a)Mark up pricing-adding a standard mark up to the pdt’s
cost.
• MUP(profit on sale) =unit cost/(1-desired return on sale)
• #expected level of sale is mandatory
• b)Cost plus pricing (profit on cost)
• CPP=C+ x% of C
• c)Target Return Pricing-the price that would yield its target
rate of return on investment(ROI)
• TRP=unit cost+(investment x desired return)/unit sales
• *if the sale doesn’t reach 50,000 units the mf can prepare a
break even chart to estimate at difft sales level
• BE(vol)=FC/(P-VC)

11. Customer based pricing
a)Perceived value pricing-the value perceived in the brand
by the customer is the basis for setting the price.
The non price variables are used to build up perceived
value ie.durability,reliability,service,warranty or image
b)Value pricing-low price for a high quality pdt
‘more for less’
The P represents an extraordinary bargain and is made
possible through Re engineering/outsourcing/mass
prodn/experience/technology in order to cut cost
significantly without compromising quality

12. Comptn based pricing
1.going-rate pricing-charging the same P as that of the
competitors
`follow the leader’, irrespective of its own cost& demand’
2.Bidding pricing-quoting the P for the offer by the cust as
against that of the competitors
a)Open bidding(Auction); info about competitors
quotation is already known to the bidder.highest bidder
is favoured
b)Sealed bidding(Tender): the P is quoted in a sealed
envelope in an anticipation of the price quoted by the
competitors.Lowest bidder is favoured

13. Pricing strategy
P is to be set in consonance with the typical
situation confronted by the mktg orgn.
The alternative strategies include
1.New pdt Pricing
2.Pdt-mix Pricing
3.Adjustment Pricing
4.Price change

14. New product pricing
NP
Innovation Imitation
Rapid Slow
SKIMMING
PENETRATION
Premium High val Super val
Overcharging medium good
Rip-off False Eco Economy
PROMO
H L
H
L
P
H
M
L
Q
P
H M L

15. Product mix pricing
(max the overall profit from the set of related pdts)
1.Pdt line :avoid cannibalisation& incredibility
2.Optional feature:P=M+f1/f2/f3…(P+p1+p2+p3…)
Automobile/ Computer
3.Captive pdt:P=M+C
one time purchase+recurrent /camera+film/printer/cartige
Low price+high price
4.Two part:P=F+V,fixed charge+variable usage
charge/electricity:meter charge+ units consumed
5.By product: fractional distillation of petroleum(scrap)
6.Pdt bundling:bundling difft pdts together & offering it at a
lesser a price than the sum total of each

16. Adjustment pricing
1.Discount& allowance-
a)cash/trade:early payment(2/10,1/30,n/60)//at the
time of purchase on the list price
b)Quantity-resulting out of saving against expenses on
selling,inventory,transportion
c)functional-storing,record-keeping,advertising, selling
d)seasonal-to maintain steadier production round the
year
e)allowance-promo money to retailers to feature mf’s
pdts
*trade-in-A:exchange offer
*promo A-offered to dealer for advtg,sales support

17. 2.Promotion pricing
a)Loss leader- reducing the price of leading brands
to increase traffic at store
b)Special event-world cup
c)Cash rebate-Mf to C,to reduce inventory
d)discount-seller to C(price reduction)
e)Low interest financing-instead of lowering the
price

18. 3.Discriminatory pricing
charging difft price that doesn’t reflect the diff in
cost
a)segment-student concession/senior citizen
b)Pdt form-paste/powder/gel
c)location-theatre/airways
d)Time-telephone/interest
e)image-pricing the same pdt at two difft levels
based on image diff
Perfume:ordinary pack/fancier pack,difft name

19. 4.Psychological Pricing
a).Indicative –when cust cant judge Q due to lack
of info &skills,P provides the cue
b).image-ego sensitive:cosmetic,perfume
c)Reference-65 50
d)Odd No.-10,999
e)round/angular No.-9,8,/1,4,7-smoothing/jarring

20. 5.Geographical pricing
a)FOB-Customer pays the freight
b)Uniformed delivered –same price for all
c)zone- diff P for diff zones
d)Freight absorption-seller absorbs all or a part of
freight to get the biz
e)Basing point-select a city as a ref pt. for charging
the freight from the customers irrespective of the
city from where it is being shipped

21. Price change
Initiating P cuts
a)Excess capacity
b)Down with mkt share
c)Cost leadership-drive to dominate the mkt
through lower cost
d)Recession
e)Inventory overload:stock clearance
Initiating P increases
a)inflation-increase in cost of inputs
b)Overdemand

22. • Responding to high cost/demand
• a)Increase the price(if not possible)
• b)Reduce the amount
• c)substitute-material /package
• d)Reduce features,services-create economy
brands /start charging for free services/
discontinue warranty
• e)Reduce the no. of models

23. THANK YOU
SO MUCH!
ANY QUESTIONS?
Call:7870701208