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JAIIB Super Notes: Principles and Practices of Banking: Module-D: Pricing

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JAIIB Super Notes: Principles and Practices of Banking: Module-D: Pricing

  1. 1. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Pricing Module D: Support Services Marketing of Banking Services/Products
  2. 2. JAIIB – Super-Notes© M S Ahluwalia Sirf Business JAIIB – SUPER NOTES Principles & Practices of Banking: Pricing
  3. 3. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Contents Coverage: 1. Importance of Pricing 2. Objectives of Pricing 3. Factors influencing Pricing 4. Pricing Methods 5. Pricing Strategies 6. Bank Pricing
  4. 4. JAIIB – Super-Notes© M S Ahluwalia Sirf Business IMPORTANCE OF PRICING 1.
  5. 5. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Pricing • Price is the sum value of all the values that consumers exchange for the benefits or having or using the product or service
  6. 6. JAIIB – Super-Notes© M S Ahluwalia Sirf Business OBJECTIVES OF PRICING 2.
  7. 7. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Objectives Profit Survival Market Share Cash Flow Status Quo Product Quality Communicating Image
  8. 8. JAIIB – Super-Notes© M S Ahluwalia Sirf Business FACTORS INFLUENCING PRICING 3.
  9. 9. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Factors Influencing Pricing Factors Internal factors External factors
  10. 10. JAIIB – Super-Notes© M S Ahluwalia Sirf Business PRICING METHODS 4.
  11. 11. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Pricing MethodsCostg-BasedPricing Mark Up Pricing: Variable costs and contribution for fixed costs Absorption Cost Pricing: Margin for profit Target Return Pricing: Return on the investment Marginal Cost Pricing: Direct variable costs are fully realized. Only a portion of fixed costs may realized Value-BasedPricing Perceived Value Pricing: Buyer’s perception of value Value Pricing: Product with high value at a fairly low price Competition-Based Pricing Going Rate Pricing: Based on competitor’s prices Auction Type Pricing: •English Auctions - One seller many buyer •Dutch Auctions •Sealed Bid Auctions Group Pricing
  12. 12. JAIIB – Super-Notes© M S Ahluwalia Sirf Business PRICING STRATEGIES 5.
  13. 13. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Pricing Strategies Geographical pricing Price discount and allowances Psychological pricing •Loss-leader pricing: Loss is covered by sale of other items •Special event pricing •Cash rebates •Low-interest financing •Longer payment terms •Warranties and service contracts •Psychological discounting Promotional pricing • First degree: Different prices to each customer depending upon their intensity of demand • Second Degree: Lower prices for buyers of a larger volume • Third degree: Depending upon class of buyer: • Customer Groups: Student, Senior Citizen • Product form • Image pricing • Channel • Location • Time Discriminatory pricing Market Skimming Pricing Market Penetration Pricing
  14. 14. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Pricing Strategies • Product Line Pricing: Developing a product line • Captive Product Pricing: Main product at lower price, ancillary product at higher price • Two-Part Pricing: Split into fixed and variable component • By-Product Pricing: Byproducts obtained in production of other products • Product-bundling pricing Product Mix Pricing
  15. 15. JAIIB – Super-Notes© M S Ahluwalia Sirf Business BANK PRICING 6.
  16. 16. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Bank Pricing Bank Pricing: There are two major costs, which have to be considered while pricing bank products: • Interest cost • Servicing cost Interest cost constitutes 67 % of the price and service cost is around 33 % in any bank product. Other factors: • Risk and return • Monetary policy • Capital adequacy • Cost-benefit analysis
  17. 17. JAIIB – Super-Notes© M S Ahluwalia Sirf Business Thank You! Do you have any questions or queries or some feedback to give? Just mark an email to super.msahluwalia@yahoo.com
  18. 18. JAIIB – Super-Notes© M S Ahluwalia Sirf Business M S Ahluwalia, amongst other things, is a visual artist, blogger, blog designer and of course an MBA and Banker from New Delhi, India. To know more about him you may visit his blog-site: Estudiante De La Vida For more Super-Notes visit: Sirf Business

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