This document discusses pricing strategies and price changes. It begins by defining pricing and describing new product pricing strategies like market skimming and market penetration pricing. It then discusses adapting prices based on location and demand, as well as product mix pricing strategies. The document outlines reasons for initiating price cuts, like excess capacity, or price increases, like inflation. It describes customers' and competitors' potential reactions to price changes and strategies companies can use to avoid pricing issues, like maintaining fairness. The overall document provides an overview of fundamental pricing concepts and considerations around price adaptation and changes.

1. MARKETING MANAGEMENT
PRICE ADAPTATION
&
PRICE CHANGES

2. LEARNING OBJECTIVE
 Described the major strategies for pricing initiative & new
products.
 Explain how companies find a set of prices that maximize the
profit from the total product mix.
 Discuss the key issues related to initiating & responding to
price changes.

3. CHAPTER OUTLINE
 Pricing basics
 New product pricing strategies
 Price adaptation
 Product mix pricing strategies
 Price changes
 Responding to price change

4. What is “pricing” ?
pricing is fundamental aspect of financial modeling and is one of the four Ps of
the marketing mix . Pricing is the process of determining what a company will
receive in exchange of its product. Pricing factors are – manufacturing cost, market
place , competition, market condition & quality of product.
** Armstrong & kotler: “ price is defined as the amount of money charged for a
product or services, which customer has to pay .

5. ADAPTING THE PRICE
price adaptation is the ability of a business to change its pricing models to suit
different geographic areas, consumer demands & prevailing incomes. Market play
a significant role in price adaptation because pricing strategy is one of the four
main components in determining product positioning , which how a company
chooses to present product to consumers.

6. New Product Pricing Strategy:
Pricing strategy :
1. Market skimming pricing
2. Market penetration pricing

7. Price skimming :
Market skimming pricing is a strategy with high initial prices to “skim”
revenue layers from the market . It can be defined as strategy where a consumer
will pay highest initial price demanded by a firm. Once the demand of initial
consumer is fulfilled it reduce the price of product.
Example : mobile phones launched at higher price after certain period price are
gradually decreased by company

8. Market Penetration Pricing
Market penetration pricing sets a low initial price in order to
penetrate the market quickly & deeply to attract a large
number of buyers quickly to gain market share .
The main motive of penetration pricing is to compel
customers to buy the low-priced new product .
Example : Any new FMCG Product.

9. Product-Mix Pricing Strategies
Relatively different pricing strategy should be utilised
for pricing products, which are a part of the product mix . A
combination of prices suitable for the entire mix is selected by
the company to ensure the increased revenues. Due to
presence of interrelationship between demand & cost of diff
products & diff level of competition , this product mix pricing
is very challenging.

10. Product line pricing :
product line pricing takes into account the cost differences between
product in the line , customer evaluation of their features , & competitors price .
anti dandruff RS. 50 anti hair fall Rs.60 hair cleaner Rs. 55

11. Optional product pricing
Optional product pricing takes into account optional or accessory products along
with the main product. Many company offer optional products , features , &
services along with their main product.

12. Captive product pricing :
captive product pricing involves product that must be used along with the
main product.
some product require the use of ancillary or captive product. Manufacture of
razors & cameras often price them low & set high markups on razors blades & film
respectively.

13. Two part pricing :
Two part pricing where a price is broken into
1) fixed fee
2) variable usage fee
service firms often engage in two part pricing , consisting of a fixed fee
plus a variable usage fee. Telephone users pay a minimum monthly fee plus
charges for calls beyond the minimum number.

14. Product Bundle Pricing :
Product bundle pricing combines several products at a reduced price . In case
company sells products individually as well as in the form of bundles, it is termed
as mixed bundling. The company charge less in case of mixed pack.

15. GEOGRAPHICAL PRICING
 Different regions and different parts of state , country around globe
 In selecting its products price for different region a business also
adapt its marketing strategies
1. Barter
2. Compensation deal
3. Buyback arrangements

16. PRICE DISCOUNT & ALLOWANCE
 Tactic is response to aggressive competition
 Discounting can be dangerous unless carefully controlled& conceived as a part of
overall marketing strategy.
 TYPES OF DISCOUNT :
1. Cash & settlement discount
2. Quantity discount
3. Promotional discount

17. PSYCHOLOGICAL PRICING
 It uses the customers emotional response to encourage sale
 Strategic pricing by a company may increase the sale without
significantly reducing price.
 Some cases high price more likely increase sale.
 this strategy is based on the theory that certain process have
psychological impact on consumer than others.

18. PRICING STRATEGIES
Pricing strategies is important for market –positioning and decision,
which depends on the overall business strategies and on marketing
plans.
Several pricing strategies are:
1. Promotional pricing
2. Discriminatory/differentiating pricing.

19. PROMOTIONAL PRICING
Several techniques that company uses to stimulate their early purchases:
 Loss-leader pricing:
 supermarket and departmental stores lower the price on known brands to maintain the
additional store traffic.
 The leader brand oppose because this can effect their brand image.
 In this method the manufacture's tries to restrain the mediators from the loss -leader
pricing by maintenance if law ,but now has been revoked.
 Special event pricing:
 Seller establishes certain prices on seasons to draw more customers .

20.  Cash rebates:
 The cash back offers are given on consumers –goods to increase purchase within
specific period of time.
 It also helps in clearing the inventories without cutting price.
 Low-interest financing:
 the company offers low –interest financing or no-interest financing to attract the
customers.
 Longer payment terms:
 Seller, mortgage banks and auto companies stretch loans with low monthly payments.
 Consumers worry less about the cost of loan and more about what they can afford.

21. DISCRIMINATORY/DIFFRENTIATING
PRICING
Differential pricing is the strategy of selling the same product to different
customers at different prices.
 Customer-segment pricing:
 the price of the same or different products and services sold to different
customer.
 It depends on ability of customer to pay.
 Product-form pricing:
 Seller charges 2 different prices for different versions of product not in
proportion to their respective cost.

22.  Image pricing:
 Price same product at two different level based on image difference.
 E.g. a perfume manufacturer can put perfume in one bottle with one name and image and
charge 50rs and similarly can put that same perfume in other bottle with different name and
image and charge 200rs
 Channel pricing:
 Method in which the price depends on the means of delivery of a good or service.
 E.g. Coca-Cola carries different price depending on whether its purchased in a restaurant, a
fast- food etc.
 Time pricing:
 Time-based pricing is a pricing strategy in which businesses set flexible prices for products
or service based on current market demands.

23. INITIATING PRICE CHANGE
Price change means hike or reduction in prices. Many perceive that high-quality product tend to cost more and
price increase may become an indicator of high quality and vice-versa.
A.Initiating price
cuts:
• Initiating price cuts may
appear easier than
imitating price changes.
• In fact, customer
response to price cuts is
normally better than
Price increase:
• There are number of
reasons for at company
hike prices they are as
follows -
Technique to avoid
pricing cut/
increase situation:
• There are some
techniques for avoiding
problems they are as

24. A.Initiating price
cuts:
• to price increases.
• On the other hand, price
cuts reduce the profit
margin for the company.
• The condition that lead a
firm to reduce prices are
as follows-
• Un-utilised production
capacity
• Excess capacity
• Falling market share
• Cut-throat competition
• Economic down turn
Price increase:
• Inflation
• Products' novelty
• To increase profit
• Over demand
• Shifting in customer
perception
Technique to avoid
pricing cut/ increase
situation:
• Maintain a sense of
fairness
• Making low-visibility
price moves first
• Ways to meet demand
without raising prices

25. RESPONDING TO PRICE CHANGE
Customer
reaction
• Negative and
positive
reaction
Competitors
reaction
• Large and few
numbers of
competitors.

26. INITIATING PRICE CUTS
Un-utilised
production
capacity
Excess
capacity
Falling
market
share
Cut-throat
competition
Economic
downturn

27. INITIATING PRICE INCREASE
Inflation
Products
novelty
To
increase
profit
Over
demand
Shifting in
customer
perception

28. BUYERS ACTION TO
PRICE CHANGE
• Substitute product
• Complimentary goods
• Avoid purchasing the
product
COMPETITORS ACTION
TO PRICE CHANGE
• Reduce manufacturing
cost
• Launch low price
fighting product
• Improve quality of
product

29. THANK YOU..