1. PRICING
“The amount paid by Customer for
obtaining goods &Services”
OR
“Exchange of Goods or Services in
terms of Money”

2. Price &Non-Price Competition
 Price competition:-marketer who can sell
his products at the lowest cost will usually
win a larger part of the market share
 Eg,Pepsi &Coca-cola
 Parle &Britannia

3.  Non-Price competition
 When marketer focus on factors other than
the price, such as features, quality of the
product, packaging
 Eg,Mercedes

4. Factors Affecting Pricing Decisions
Pricing Decisions
Internal factors External factors
Orgn
factors Demand
Marketing
Competition
mix
Product
Suppliers
Diff n
Cost Buyers
Objectives Govt

5. Setting the pricing objective
Determining demand
Estimating costs
Analysing competitor’s costs,
Prices and offers
Selecting the pricing method
Selecting the final method

6. Setting the Pricing Objectives
 Survival – is a short run objective
 Maximum current Profits
 Maximum Market share
 Maximum Market Skimming
 Product quality

7. Determining demand
 Each price will lead to a different level of
demand
 Customers are more price sensitive
 Marketers need to know how responsive or
elastic, demand would to change a price.

8. Estimating Costs
 The company wants to charge a price that
covers its cost of producing, distributing
and selling the product.

9. Analysing competitor’s costs,
prices and offers
 Company must take competitor’s costs,
prices and possible price reactions into
account.
 Firm should first consider the nearest
competitors price.

10. Selecting pricing method
 For selecting pricing method company must
include any of the 3 C’s
- Customers’ demand schedule
- Cost function
- Competitors’ prices
Company can select any of the following
method

11. Pricing Methods
 Mark-up pricing
 Return on investment
 Perceived pricing
 Going rate pricing
 Sealed bid pricing
 Value pricing
 Market skimming

12. Selecting final price
Pricing methods can narrow the range from
which company must select its final price
 The final price must take into account the
brand’s quality and advertising relative to
the competition.

13. Pricing methods
 Mark-up pricing:-Marketer adds a mark-up
on its cost of the product
 Markupselling price
 Target return pricing:-marketer has to
achieve specified return on their investment
 Unit cost + desired return*invested capital
unit sales

14. Contd……
 Perceived value pricing:- companies
deliver the value promised by their value
proposition, and customer must perceive
this value.
 Each potential customer places different
weights on different elements
These are Price buyers, value buyers, loyal
buyers

15. Pricing methods
 The key to perceived value pricing is to
deliver more value than the competitor
and to demonstrate this to prospective
buyers.
 Company can determined the value of
its offering in several ways like value of
similar products, focus group, surveys,
experimentation etc.

16. Value pricing Through this companies
can win loyal customers by charging a
fairly low price for a high-quality
offering.
Ex…(Global) Wal-Mart, IKEA, Southwest
airlines, (Indian) Bata, Peter England
and Big Bazar

17.  Going rate pricing Firm bases its prices
largely on competitors’ prices.
 Firm might charge the same, more, or
less than major competitors
 Example – oligoplistic market

18.  Auction type pricing
 English Auction (ascending bids) – One
seller and many buyers ex. Antiques,
real estate, use equipments etc.
 Dutch Auction ( descending bids) – One
seller and many buyer or one buyer and
many seller

19.  Sealed – bid auctions Would – be
suppliers can submit only one bid and
cannot know other bids. ex. Most of the
govt. organizations, large corporations,
and institutions