Method use to price a product or a service It is aimed at finding a product’s price Determined on expenses such as advertising and labour It also includes marketing objectives, consumer demand, product attributes Competitors pricing, market and economic trends also play a vital role in deciding the price
Penetration Pricing Market Skimming Value Pricing Psychological Pricing Price Discrimination Tender Pricing Destroyer Pricing Full Cost Pricing Target Pricing Marginal Cost Pricing Cost Plus Pricing
Prices set to penetrate the market Low prices to secure high volumes To attract customers to a new product or service Prices are low to get competitors customer Typically used in mass market products like – Chocolates, household goods, food stuffs etc.
High price and low volumes Skimming the profit from the market Goods are sold at a higher price so that fewer sales are required to break even Skimming is used to reimburse the cost of investment of research into the product Eg. Playstation, jewellery, digital technology etc.
Price is set in accordance to customer perceptions about the product It is always predicated upon an understanding of customer value It is successful when products are sold in niche market Eg. Rolls Royce, Rolex, Private jets etc.
Pricing designed to have a psychological impact It is used to play with the consumers perceptions Classic example – selling a Television set for Rs.9999 instead of Rs.10000
Charging a different price for the same goods/services in different markets It allows the company to earn a higher profit The company charges each customer the maximum that he or she is willing to pay Eg. Movie theatre charge 3 different ticket rates – Platinum, Gold and Silver
Many Contracts are awarded on a tender basis Firm (or firms) submit their prices for carrying out their works Purchaser then chooses which represents best value for the contract It is mostly done in secret Eg. Government Contracts
Deliberately setting prices low in order to eliminate the competition Offering free gifts/products to force out (normally) smaller and weaker out of business Done to prevent new entrants into the market It is highly anti-competitive Illegal in countries like Australia and The United States of America
The price is set to cover the variable cost and the fixed cost It is also called as a Absorption Cost Pricing/Break Even Pricing A price at which the cost or expenses are equal to revenues A no loss or gain situation Eg. If sales go below 200 company makes loss and if it goes above 200 it makes profit so company should achieve to sell atleast 200 to attain break even
The selling price is calculated to produce a particular rate of investment These pricing methods are used by public utilities like electric companies It is also useful for companies with high investments – Automobile manufacturers
The method of setting the price of a product to equal the cost of producing an extra unit of output The cost of producing one extra unit Marginal cost pricing allows flexibility It also aims to achieve “contribution” towards fixed costs and profit
One of the simplest pricing method The company calculates the cost of producing the product and adds on % profit This method takes into considerations all relevant cost CPP = Total budgetary factor coat + selling and distribution cost + mark-up cost