2. In ordinary usage, price is the quantity of
payment or compensation for something.
Economists view price as an exchange ratio
between goods that are exchanged for each
other.
Define Price
3. PRICE=
Quantity of Money received by the Seller______
Quantity of goods and services received by the buyer
4. You
Pay a
Price
When you pay College Fees
When you pay Hostel fees
When you pay rent to the PG
When you pay the Telecom Bills
When you pay for the Birthday cakes
When you pay for the interest of the Loan
When you pay charges to your trip
When you pay for the Petrol
6. Pricing is a fundamental aspect of financial modelling, and is one
of the four P’s of the marketing mix.
Price is the only revenue generating element amongst the four P’s, the rest being
cost centers.
Pricing is the manual or automatic process of applying prices to purchase and
sales orders, based on factors such as: a fixed amount, quantity break, promotion
or sales campaign, specific vendor quote, price prevailing on entry, shipment or
invoice date, combination of multiple orders or lines, and many others.
Pricing is the process of determining what a company will receive
in exchange for its products. Pricing factors are manufacturing
cost, market place, competition, market condition, Quality of
product.
7. What a price should do
A well chosen price should do three things:
• Achieve the financial goals of the company
(e.g., profitability)
• Fit the realities of the marketplace (Will
customers buy at that price?)
• Support a product's positioning and be
consistent with the other variables in
the marketing mix .
8. Setting Pricing Policy
1. Selecting the pricing
objective
2. Determining demand
3. Estimating costs
4. Analyzing competitors’
costs, prices, and offers
5. Selecting a pricing
method
6. Selecting final price
9. Price is influenced by the type of distribution channel used, the type of promotions used,
and the quality of the product.
Price will usually need to be relatively high if manufacturing is expensive, distribution is
exclusive, and the product is supported by extensive advertising and promotional
campaigns
A low price can be a viable substitute for product quality, effective promotions, or an
energetic selling effort by distributors
From the marketer's point of view, an efficient price is a price that is very close to the
maximum that customers are prepared to pay.
In economic terms, it is a price that shifts most of the consumer surplus to the producer. A
good pricing strategy would be the one which could balance between the price floor (the
price below which the organization ends up in losses) and the price ceiling (the price
beyond which the organization experiences a no demand situation).
Price is Influenced By…………………………….
18. 18
Geographic Pricing
Basing-Point Pricing:
The seller designates a location as a basing
point and charges all buyers the freight costs
from that point.
Freight Absorption Pricing:
The seller pays for all or part of the freight
charges and does not pass them on to the buyer.
Zone Pricing:
The U.S. is divided into zones and a flat freight
rate is charged to customers in a given zone.
Uniform Delivered Pricing
The seller pays the freight charges and bills
the purchaser an identical, flat freight charge.
FOB Origin Pricing:
The buyer absorbs the freight costs from the
shipping point (“free on board”).
Common
Methods of
Geographic
Pricing
26. Product Mix
Pricing Strategies
• Product Line Pricing
– Setting price steps between product line items.
Eg. Suits at three price levels- Rs.800,1500,4500.
29. Product Mix
Pricing Strategies
• Captive-Product Pricing
– Pricing products that must be used with the
main product
High margins are often set for supplies
Eg: Blades are costlier than razors
32. Molasses can be used as:
•The principal ingredient in the distillation of rum
•In beer styles such as stouts or porters
•An additive in tobacco smoked in a hookah shisha, or narghile (found in
the brands "Cedars Tobacco", Mazaya, Al-Fakher, Nakhla, Tangiers,
Salloum and Hookafina Blak )
•In dark rye breads
•An additive in livestock feeds
•An ingredient in fishing groundbait
•A source for yeast production
•An iron supplement
•The main ingredient in the production of Citric acid
•In certain cookies
•As a humectant in jerky processing
33. • Product Bundle Pricing
– Pricing bundles of products sold together.
35. Psychological Pricing
Most Attractive?
Better Value?
Psychological
reason to price this
way?
A
.
Rs.219
B Rs.199
Assume Equal Quality
36. Special Pricing
Single-Price Tactic
Flexible Pricing
Professional
Services Pricing
Price Lining
Leader Pricing
Bait Pricing
Odd-Even Pricing
Price Bundling
Two-Part Pricing
All goods offered at the same price
Different customers pay different price
Used by professionals with experience,
training or certification
Several line items at specific price points- lxi/vxi/zxi
Sell product at near or below cost
Lure customers through false or misleading
price advertising
Odd-number prices imply bargain
Even-number prices imply quality- 499
Combining two or more products in a
single package
Two separate charges to consume a single good-
mobile tariff
37. Factors Influencing Pricing
Decisions
Internal Factors
•Organizational Factors
•Marketing Mix
•Product Differentiation
•Cost of the Product
•Objectives of the Firm Pricing Decision
External factors
•Demand
•Competition
•Suppliers
•Economic Conditions
•Buyers
•Government
41. 1.Full cost /Mark up Pricing / Cost + Pricing Method
In this pricing method the marketer estimates the total cost of
production and then adds a mark up or a margin which the
firm wants. To arrive at a mark up price the following formula
is used:
Mark Up price = ____α_____
(1-r)
Alpha= fixed cost + variable cost
R= expected return on sales expressed as a percent
Eg. If the fixed cost of making 10,000 shirts is Rs.1,50,000
and the variable cost per shirt is Rs.30/= and the firm expects
a return of 30% on its sales. Find out the mark up price.
42. Did you get the Mark Up cost
as Rs.64.28/Shirt.
This is also called as “Sum of
Margin Method
43. 2. Marginal cost/Incremental cost pricing method
Here the firm works on the premise of recovering its marginal
cost and getting a contribution towards its overheads.
This method works well for the market which is dominated by
giant firms or characterized by intense competition and the
objective of the firm is to get a foothold in the market.
This pricing method works when the firm has inventory of
finished goods and wants to liquidate it.
The prime concern being to recover the Direct Costs.
44. 3.Rate of return / Target Pricing Method
A firm invests Rs.50,00,00,000/= as Capital for an
enterprise and the owner says that he wants a return of
minimum 10% on the Capital and profit margin of
minimum 15%.
This is the Target Pricing method.
This method is possible only when there is No
Competition at all in the Market for this
firm/enterprise /product
46. Setting a high price for a new
product to skim maximum
revenues layer by layer from
segments willing to pay the high
price.
Market-Skimming Pricing
51. Other Pricing Policies
Price Bundling
Sealed Bid Pricing
Customer Oriented Pricing
Break Even Point Pricing
Value Based Pricing
Market & Demand based
Affordability Pricing
Prestige Pricing
52. Break Even Point Pricing
B.E.Point (in Units)= ______________Fixed Costs_____________
Selling Price per unit – Variable Costs per unit
B.E.P (in Rs.) = _____Fixed Costs X Total Sales______
Total Sales – Total Variable Costs
Break Even price= Fixed Cost + Variable costs
Quantity
53. Q1. The Fixed Costs=100000
Selling Price per unit= Rs.4/unit
Variable Costs= Rs.2/unit
Sales= 50,000 units.
Required Profit = Rs. 50,000
FIND OUT THE BREAK EVEN POINT IN UNITS,
BREAK EVEN PRICE.
