Pricing

1. Factors Effecting Pricing
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Submitted By :
Group 5
Manoj Bhoye 15PGP087
Nithin Manuka 15PGP088
Shruti Mate 15PGP089
Jaffar MD 15PGP090
Nabil Abdulla 15PGP091
Nikita Rokde 15PGP092
Marketing Management -II

2. Factors Affecting Price
Decisions
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3. INTERNAL FACTORS
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4. Marketing Objectives & Marketing
Mix Strategies
• Survival: companies strive to survive against intense
competition and changing consumer wants. The
company stays in the business so long as the prices
cover variable costs and some fixed costs.
• Maximum current profit: companies estimate the
demand and costs associated with alternative prices
and choose the price that produces maximum profits,
cash flows and return on investment.
• Maximum market share: companies believe that a
higher sales volume will lead to lower unit costs and
higher long run profits. Hence they set the lowest
price……often termed as penetration pricing
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5. Marketing Objectives & Marketing
Mix Strategies
• Maximum market skimming: here the company
unveiling the new technology favor setting high prices
to maximize market skimming. Here the price start high
and slowly drop over time.
• Product quality leadership: here in some brands
position themselves as leaders in quality with a
premium pricing and a very loyal customer base . For
instance MERCEDES AND BMW CARS, TAJLUXURY
HOTELS.
• OTHER OBJECTIVES: Non profit and public
organizations may have other objectives. For example a
university, a charitable hospital, social institutions etc.
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6. Marketing Objectives & Marketing
Mix Strategies
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7. Costs
• Depends on it product life cycle
• The costs of the product—its inputs—including the
amount spent on product development, testing, and
packaging required have to be taken into account when
a pricing decision is made. So do the costs related to
promotion and distribution.
• For a product to be profitable it must attain a break
even point
• Its where a company recovers the money it has spend
on a product and start attaining profits
• Break even point is generally attained during growth or
maturity stage
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8. Costs
• Total cost = Fixed cost + Variable cost
• Company tries to attain lower fixed cost per product by
increasing its sales
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9. Organizational Consideration
• It is the duty of the management who sets the price
• Management must decide who within the organization
should set prices. Companies handle pricing in a variety of
ways.
• For Small companies: CEO or top management
• For Large companies: Divisional or product line managers
• Price negotiation is common in industrial settings
• Some industries have pricing departments.
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10. Organizational Consideration
• In industries in which pricing is a key factor (aerospace,
steel, railroads, oil companies), companies often have a
pricing department to set the best prices or help others in
setting them.
• This department reports to the marketing department or
top management.
• Others who have an influence on pricing include sales
managers, production managers, finance managers, and
accountants.
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11. EXTERNAL FACTORS
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12. Nature of Market and Demand
• In a perfect competition where the goods are similar and
customers can switch from one product to another, the
prices should be kept low or risk losing customers to
competitors.
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13. Nature of Market and Demand
• In a monopolistic competition, where goods are similar
with many market players but slight differentiation is
possible, the product can be priced at small premium.
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14. Nature of Market and Demand
• In a Oligopolistic competition where a few players
dominate the market, the price sticks at a certain level and
the company loses customers if it tries to increase price and
if it decrease price to attract customers, the competitors
will also decrease price leading to loss in revenue
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15. Nature of Market and Demand
• In a pure monopoly market, as there are no competitors,
the company can charge high premium charges. In real,
pure monopoly seldom exists.
• When a new product is launched by Apple, it is priced high
till the competitors introduce similar products at which
point Apple reduces the price drastically
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16. Competition
• Consider competitors’ costs, prices, and possible reactions
when developing a pricing strategy
• Pricing strategy influences the nature of competition
– Low-price low-margin strategies inhibit competition
– High-price high-margin strategies attract competition
• Benchmarking costs against the competition is
recommended
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17. Other Environmental Factors
Factors
Influencing
Pricing
Price Quality
Relationship
Product Line
Pricing
Explicability
Competition
Negotiating
Margins
Effect On
Distributors
& Retailers
Political
Factor
Earning Very
High Profits
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18. Other Environmental Factors
Example:
Product Line Pricing
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19. THANK YOU
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