Pricing Price is a major element of the marketing mix.it is an important strategic issue because it is related to product positioning. Pricing is a determinant of the market demand for the product. But before any pricing decisions are undertaken ,it is important that the factors influencing price are understood. These factors can be categorized as internal and external
Influencing factors as internal andThese factors can be categorizedexternal factorsInternal factors : The internal factors affecting priceinclude cost and the company’s pricing objectives. cost factors Promotion as a cost factor Credit based transactions increase costs Pricing Objectives Profit maximization in the long run Minimum returns on sales turn over Deeper penetration of the market
Keeping up with the competition Increasing sales volume and market shareExternal factor: This factor includes – Customers Suppliers Competitors Legal environment
Discounts and allowances: Cash discounts or bargaining benefits Free gift Schemes for retailers Discriminatory pricing:• Customer segment pricing• Product form pricing• Location pricing
Optional product pricing Optional product pricing is the pricing of optional oraccessory products along with the main product like acompany selling tractors for a low sticker price butcharging high prices for serving and spare parts.Ex:
Captive product pricing Captive product pricing is setting a price for productsthat must be used along with the main product , such asblade for a razor and film for a camera.Ex:
Product bundle pricing Product bundle pricing is combining several productsand offering the bundle at a reduced price .Companies very commonly use this pricing strategyduring periods of inflation it helps to generate sales andattract customers in a highly competitive market , it ismostly used in festival.
Penetration pricing A penetration pricing policy involves setting prices ofproducts relatively low compared to those of similarproducts. This pricing policy is appropriate whendemand is elastic.Ex: Anchor white and Ajanta tooth pastes used thispricing to enter the crowded dental cream market
Economy pricing Economy pricing is no-frills low price, the cost ofmarketing and manufacturing are kept to a minimum.Regional and local manufacturers usually follow thiseconomy pricing strategy as they have limitedinvestments to make on building brands anddeveloping channels.Ex: Nirma & Ghari
Value pricing When economic recession or increased competitionforces a company to provide value products andservices to retain sales.Ex: Godrej No.1 soap placed their offering containingrose, sandalwood neem and other ingredients at a veryeconomical price .
Coinage pricing Prices are set of a coin value. Coinage price is directlyproportionate to the package size. These packs aresmall in size and are normally meant for one timeconsumption(shampoo sachet)or days consumption(teabag)or a week’s consumption(bathing or washingsoap).
Psychological pricing The price quality relationship refers to the idea thatconsumers tend to equate product quality with theprice charged.In the color TV segment LG at a higher price isconsidered a better buy than Texla and Jolly brandsparticularly in R1 households.
Discounts and allowances Cash discounts or bargaining benefits Free gift Schemes for retailers Discriminatory pricing
Discriminatory pricing Price discrimination exists when sales of identicalgoods or services are transacted at different prices fromthe same supplier, different prices are charged on thebasis of different consumer groups, location, productform etc. discriminatory pricing may take the followingnorms- Consumer segment pricing Product form pricing Location pricing
Consumer segment pricing Discriminatory pricing based on consumer segments.Ex: Museum often charge low admission fee forstudents and senior citizens.
Product form pricing Different versions of the same product are priceddifferently but not proportionately to the increase incosts.Ex: Microsoft sold different versions of its operatingsoftware windowsXP at different price level . Windowsvista home basic version is sold at $200 and with somevariations the same operating software windows vistaultimate version is sold at $320.
Location pricing Discriminatory pricing based on different locations,even though the cost of offerings at each location isidentical.Ex: Theatre charges different prices for differentaudience preferences for different locations.