Price management and pricing decisions


Published on

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Price management and pricing decisions

  2. 2. DEFINITION/ MEANING : Price – cost + profit [or] rupee equivalent of the value of the product / what the consumer will willingly pay. The factors governing prices: 1. Internal factors [ controlled] 2. External factors [ uncontrolled]
  3. 3. INTERNAL FACTORS: 1. The costs 2. The management policy • Objectives of business • Competitive situation in which the company is placed • Product and promotional policies • Nature of price sensivity • Conflicting interest of manufacturers & middle man • Rotinization of policy  Number of pricing definitions  Speed requires by pricing decisions  Quality of available information • Active entry of non- business groups into the determination of prices.
  4. 4. EXTERNAL FACTORS: 1. 2. 3. 4. Demand Competition Distribution channels Legal restraints OBJECTIVES: 1. Maximization of profits 2. Promotion of long- range welfare of the firm 3. Adaptation of prices to fit the diverse competitive situations 4. Flexibility to vary prices to met changes in economic conditions 5. Stabilisation of prices & margin
  5. 5. 6. Market penetration 7. Market skimming 8. Early cash recovery 9. Satisfying (i. e) achieving a satisfactory rate of return.
  6. 6. *** Imp PRICING METHODS: I. COST BASED PRICING :      Total cost method Mark-up pricing Absorption cost pricing Marginal cost pricing BEP pricing II. DEMAND/ MARKET BASED PRICING:     What the market can bear pricing Skimming Penetration The concept of price elasticity of demand
  7. 7. III. COMPETITION BASED PRICING: • Premium pricing • Discount pricing • Parity pricing Kinds of pricing decisions/ prices:         Odd pricing Psychological pricing Customary pricing Pricing at prevailing pricing Prestige pricing Price lining Geographic pricing Dual pricing
  8. 8.          Administered pricing Monopoly pricing Skimming pricing Penetration Expected pricing Sealed bid pricing Negotiated pricing Mark–up pricing Discriminatory pricing
  9. 9. STEPS INVOLVED IN PRICING PROCEDURE: • Identify the target customer segments & draw up their profiles • Decide the market position & price image that the firm desires for the brand • Determine the extent of price elasticity of demand of the product & extent of price sensivity of target customer groups • Take into a/c the life cycle stage of the product • Analyse competitors prices • Analyse other environmental factors • Choose the pricing method to be adopted taking all he above factors into account • Select the final price • Periodically review the pricing method as well as procedure.
  10. 10. PRICING FOR EXPORT MARKETING: 1. It is extremely sensitive factor in export trade 2. Individual exporters have no control on price 3. Understand the varied marketing situations from country to country, product to product, time to time. 4. Concept of marginal costing is better 5. Incase of dumping, marginal cost only works, fixed cost already covered and there is extra plan capacity. So, they fix marginal prices.
  11. 11. PRICING FOR SERVICES: • Services are intangible in nature • Services are perishable in nature FACTORS INFLUENCING ARE : • • • • • • Structure of the market Type of organization Prices charged by competitors The life cycle stage of the service Organisational objective Regulations of government or trade associations
  12. 12. PRICING STRATEGIES OF SERVICES: 1. Skimming pricing 2. Penetration pricing 3. Mixed pricing  Cost plus pricing  Marginal pricing  Promotional pricing  Flexible pricing  Market oriented pricing
  13. 13. *** v. imp PRICING FOR NEW PRODUCTS: I. Skimming: To skim the market and to take the cream, by pricing the new product high and concentrating on market segments which are not price sensitive. II. Penetration: If the new product is likely to be highly price sensitive and if there is no effluent market for it, penetration pricing is resorted to penetration pricing is resorted to penetrate a large market by using low prices
  14. 14. III.Price discrimination: Monopoly price discrimination • First degree price discrimination e.g: doctor • Second degree price discrimination e.g: electricity • Third degree price discrimination e.g: air lines IV.Price bundling: 1. Pure bundling [ 2 products together] 2. Mixed bundling 3. Tying – complementary & additional products
  15. 15. IMPORTANT Q’S: 1. Define price? What are the factors influencing pricing decisions? 2. What is the role of pricing in marketing mix? Explain the objectives of pricing? 3. What are the methods/approaches of pricing? 4. Explain the new product pricing methods? 5. Explain the steps involved in pricing a product & service?