Pricing(A tool of Marketing Mix)


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Pricing- a vary important tool of marketing mix.

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Pricing(A tool of Marketing Mix)

  1. 1. By:- Mithilesh Trivedi
  2. 2. •Price is the amount of money charged for a good or service •The only marketing mix element that produces revenue •The sum of all the values that consumers exchange for the benefits of having or using the product or service
  3. 3. General Pricing Approaches 1. Cost-Based Pricing 2. Value-Based Pricing 3. Competition-Based Pricing
  4. 4. Cost-Based Pricing  Adding a standard markup to the cost of the product Product Cost Price Value Customers
  5. 5. Value-Based Pricing Setting price based on buyer’s perceptions of value rather than on the seller’s cost Product Value Price Cost Customers
  6. 6. Competition-Based Pricing  Setting prices based on the prices that competitors charge for similar product
  7. 7. Pricing Strategies
  8. 8. Penetration Pricing Price set to ‘penetrate the market’ ‘Low’ price to secure high volumes Typical in mass market products – chocolate bars, food stuffs, household goods, etc. Suitable for products with long anticipated life cycles May be useful if launching into a new market
  9. 9. Market Skimming Pricing • High price, Low volumes • Skim the profit from the market • Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out) • Examples include: PlayStation, jewellery, digital technology, new DVDs, etc.
  10. 10. Loss Leader Pricing • Goods/services deliberately sold below cost to encourage sales elsewhere • Typical in supermarkets, e.g. at Christmas, selling bottles of gin at £3 in the hope that people will be attracted to the store and buy other things • Purchases of other items more than covers ‘loss’ on item sold • e.g. ‘Free’ mobile phone when taking on contract package
  11. 11. Psychological Pricing • Used to play on consumer perceptions • Classic example - $9.99 instead of $10.00! • Odd-even: $5.95, $.79, $699 OR $12, $50 • Multiple Unit-3 for !1.00 better than $.34 each
  12. 12. Going Rate (Price Leadership) • In case of price leader, rivals have difficulty in competing on price • May follow pricing leads of rivals especially where those rivals have a clear dominance of market share • Where competition is limited, ‘going rate’ pricing may be applicable – banks, petrol, supermarkets, electrical goods – find very similar prices in all outlets
  13. 13. Price Discrimination • Charging a different price for the same good/service in different markets • Requires each market to be impenetrable • Requires different price elasticity of demand in each market • Air/rail • First class • Business class • Economy class
  14. 14. Product Line Pricing Optional- Product Pricing Captive- Product Pricing By-Product Pricing Product Bundle Pricing Product Mix Pricing Strategies
  15. 15. Product Line Pricing  Setting the price steps between various product line based on cost difference between the products, customers evaluations of different features and competitors’ prices Optional- Product Pricing  The pricing of optional or accessory products along with a main product Captive- Product Pricing  Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera
  16. 16. By-Product Pricing  Setting a price for by-product in order to make the main product’s price more competitive Product Bundle Pricing  Combining several products and offering the bundle at a reduced price
  17. 17. Strategy Description Discount and Allowance Pricing Reducing prices to reward customer responses such as paying early or promoting the product Segmented Pricing Adjusting prices to allow for differences in customers, products, or locations Psychological Pricing Adjusting prices for Psychological effect Promotional Pricing Temporarily reducing prices to increase short-run sales Geographical Pricing Adjusting prices to account for the geographic location of customers International Pricing Adjusting prices for international markets Price Adjustment Strategies
  18. 18. Price Changes •Price cuts •Price increases Initiating Pricing Changes Price increases • Product is “hot” • Company greed Price cuts • New models will be available • Models are not selling well • Quality issues
  19. 19. Price cuts occur due to: •Excess capacity •Increased market share Price increase from: •Cost inflation •Increased demand •Lack of supply Price Changes
  20. 20. Public Policy andPricing Price fixing: Sellers must set prices without talking to competitors Predatory pricing: Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business
  21. 21. Pricing Across Channel Levels Retail (resale) price maintenance is when a manufacturer requires a dealer to charge a specific retail price for its products Deceptive pricing occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers • Scanner fraud failure of the seller to enter current or sale prices into the computer system • Price confusion results when firms employ pricing methods that make it difficult for consumers to understand what price they are really paying