For MBA and M.com Students

2. What is a Price????????
The amount of money charged for a product or a service.
It is the some of all the values that a customer give up in order
to gain the benefits of having or using the product or service.
It is the monetary value of a product or service.
“Price is the most important element
determining a firm’s market share &
profitability.”

3. Price is the only element in the
marketing mix that generates
revenues; all other represent cost.
It is one of the most flexible
marketing mix.

5. Value based Pricing:
“Setting prices based on buyer’s
perception value rather than on the
seller’s cost.”
The company sets its target price based on customer
perception of the product value.
The value & price then drive decisions about product
design & what cost can be incurred.

6. Good-
Value
Pricing
Value-
Added
Pricing
Types of
Value-
Based
Pricing

7. Good-Value Pricing:
“Offering just the right combination
of quality & good service at a fair
price.”

8. Value-Added Pricing:
“Attaching value added features &
services to differentiate a company’s
offers & to support charging higher
prices.”
Examples:
Santro, GLI, XLI.
Dawlance H-zone Washing Machine.
Blackberry cell phone.

9. Cost-Based Pricing:
“Setting prices based on the costs for
producing, distributing & selling the
product plus a fair rate of return for
effort & risk”
Examples:
Auto Mobile Industry
Home Appliances Industry
Imported Cosmetics
Construction Companies

10. Types of Costs:
Fixed Costs(overhead):
Costs that do not vary with production or sales level.
Variable Costs:
Costs that vary directly with the level of production.
Total Costs:
The sum of fixed & variable costs for any given level of
production.

11. “Setting prices to break even on the costs of making &
marketing a product; or setting prices to make a target
profit.”
Break Even = Fixed cost
Price – Variable cost
Break-even Analysis(Target Profit Pricing):
Target Costing:
Pricing that starts with an ideal profit price, then target
costs that will ensure that the price is met.

13. Product Cost Price Value Customer
ProductCostPriceValueCustomer
“Cost based Pricing”
“Value based Pricing”

14. Internal
Factors
Company’s
Marketing
Strategy
Objectives
Marketing Mix
Organizational
Consideration
External
Factors
Nature of
Market &
Demand
Competitors
Strategy &
prices
Environmental
Factors

17. 1. MARKET SKIMMING PRICING
“Setting a high price for a new product to skim
maximum revenues layer by layer from the segments
willing to pay the high price; the company makes fewer
but more profitable sales.”
Example:
World Call Wireless USB started price at Rs.3999then shrank to
Rs.1299
Seasonal Products
Cell Phones
Sony Play station 3 initially sold at $599 then gradually reduced to
$299
Technological Markets

18. 2.MARKET PENETRATION PRICING
“Setting low price for a new product in
order to attract a large number of buyers &
a large market share.”
Examples:
Consumer products
Shopping products
Market of DVD Players

20. 1.PRODUCT LINE PRICING
“Setting the price steps between various products
in a product line based on cost difference between
the products, customer evaluations of different
features, & competitor’s prices.”
Examples:
Beverage line of Nestle
Bakeparlor of kolson
Home care line of Unilevers

21. 2.OPTIONAL PRODUCT PRICING
“The pricing of optional or accessory
products along with the main product.”
Examples:
VCD Player Option in Cars
Digital Microwave Oven
Ice Bar Option in Refrigerator
Assembling of Computer System

22. 3.CAPTIVE PRODUCT PRICING
“Setting a price for products that must
be used along with a main product.”
Examples:
Bikes & Petrol
Stapler & Pins
VCD Player & CD’s
Printers & ink fillings
Washing Machine & Detergents

23. 4.BY-PRODUCT PRICING
“Setting a price for by-products in
order to make the main product’s
price more competitive.”
Examples:
Wallets, handbags from leather cuttings
Paper from sugarcane wastage
Sewage & manure as fertilizers

24. 5.PRODUCT BUNDLE PRICING
“Combining several products
& offering the bundle at a
reduced price.”
Example:
Baby Packs
Makeup Packs
Gents Wallet Packs
Tooth paste & Tooth Brush packs
Perfumes & Body Spray Packs
Shirt & Tie Packs
Facial Kits

26. 1.DISCOUNT & ALLOWANCE
Price reduction on large volume sales
Cash Discount
Quantity Discount
Functional/Trade
Discount
Seasonal Discount
Price reduction to loyal customers
Price reduction to trade channel members
Price reduction on off-season purchases
“A straight reduction in price on purchases during a
stated period of time.”

27. Conti…
“Promotional money paid by manufacturers to
retailers in return for an arrangement to feature
the manufacturer’s products in some way.”
Trade-in-
Allowance
Promotional
Allowance
Price reduction for turning on an old item when
buying a new one
Price reduction to award dealers for achieving
some target

28. 2.Segmented Pricing
“Selling a product or service at two or more prices, where the
difference in prices is not based on differences in costs.”
Product-form
Customer-
segmented
Location based
Time based
Different versions of products at different
prices
Different customers pay different prices for
same products
Different prices for different locations
Seasonal prices of products

29. 3.Psychologocal Pricing
“A pricing approach that considers the psychology of
prices & not simply the economics; the price is used to
say something about the product”
Reference
Prices
Sales Sign
Prices ending in
9
Sign post
Pricing
Pricing-Matching
Guarantees
Buyer carry in their minds & refers to when
looking products
Sales! New low Prices! Price after Rebate! Buy
1, Get 1.
9 digit at the end of price; $12999
Price below cost to pull customer; Loss Leader
Price
Seller promises to meet or beat any
competitor’s price

30. 4.PROMOTIONAL PRICING
“Temporarily pricing products below
the list price, & sometimes even below
cost, to increase short-run sales.”
Loss Leaders
Special Events
Cash Rebates
Others
Low prices to appeal customers
In certain seasons to draw more customers
For customers who buy product from dealers
Low-interest financing, Longer Warranties,
Free maintenance, Discount Offers

31. 5.GEOGRAPHICAL PRICING
“Setting prices for customers located in
different parts of the country or world.”

32. 6.DYNAMIC PRICING
“Adjusting prices continually to meet
the characteristics & needs of
individual customers & situations”
Many direct marketers monitor inventories, costs &
demand at any given moment & adjust prices instantly.
Buyers also benefit from Web & Dynamic Pricing;
negotiate prices at online auction sites & exchanges.
It adjust prices according to market forces & often works
in the benefit of customers.

33. 7.INTERNATIONAL PRICING
“Companies trading internationally may set
different prices in different countries or a
uniform price internationally”
Factors affecting international pricing:
Economic Conditions
Competitive Situations
Laws & Regulations
Wholesaling & Retailing System
Customer Preference & Perception
Marketing Objectives
Various World Markets

35. SUPPLY CHAIN
“Producing a product or service & make it
available to buyers requires building
relationships not only with customers, but
also with the key suppliers & resellers forms
a company’s supply chain”

36. PARTNERS OF SUPPLY CHAIN
UPSTREAM PARTNERS:
A set of firms that supply the raw material,
components, parts, information, finances & expertise needed to
create a product or service.
DOWNSTREAM PARTNERS:
It is a set of wholesalers & retailers, form a vital
connection between the firms & its customers.

37. VALUE DELIVERY NETWORK
“The network made up of the company,
suppliers, distributers & ultimately customers
who “partner” with each other to improve the
performance of the entire system.”

38. MARKETING CHANNEL
“A set of interdependent organizations that help
make a product or service available for use or
consumption by the consumer or business user”

39. Functions of Marketing Channel
Storage
Customer Search
Promotion
Flow of Product
Payment Flow
Contact
Customer Feedback
Negotiation
Finance
Risk Sharing
Information
Matching

40. CHANNEL LEVEL
“A layer of intermediaries that performs
some work in bringing the product & its
ownership closer to the final buyer.”
Direct Marketing Level/Zero Level:
A marketing level that has no intermediary level.
Indirect Marketing Channel:
A channel containing one or more intermediary levels.

41. Producer
Customer Customer
Retailer
Producer
Retailer
Wholesaler
Customer
Producer
ZERO LEVEL ONE LEVEL TWO LEVEL

42. CHANNEL CONFLICT
“Disagreement among marketing channel
members on goals & roles-who should do
what & for what rewards.”
Horizontal Conflicts:
That occur among firm at the same level of channel.
Vertical Conflicts:
That occur between different levels of the same channel.

43. Conventional Distribution Channel
“A channel Consisting of one or more independent
producers, wholesalers & retailers each a separate
business seeking to maximize its own profit even at the
expense of profits for the system as a whole.”

44. Vertical Marketing System
“A distributional channel structure in which
producers, wholesalers & retailers act as a united
system. One channel member owns the others,
have contracts with them, or has so much power
that they all cooperate.”

45. Retailer
Wholesaler
Customer
Producer
Wholesaler
Retailer
Producer
Customer
Conventional
Marketing Channel
Vertical Marketing
Channel

46. Major Types of VMSs:
1.Corporate VMS:
“A vertical marketing system that combines successive
stages of production & distribution under single
ownership- channel leadership is established through
common ownership.”
It integrates successive stages of production & distribution
under single ownership.
Coordination & conflict management are attained through
regular organization channel.

47. 2.Contractual VMS:
“A vertical Marketing System in which independent firms at
different levels of production & distribution join together through
contracts to obtain more economies or sales impact than they could
achieve alone.”
Most common type is Franchise Organization- a channel member
links several stages in the production-distribution stages.
Three types of Franchises:
Manufacturer-Sponsored Retailer Franchise System
Manufacturer- Sponsored Wholesaler Franchise System
Service-Firm-Sponsored Retailer Franchise System
Major Types of VMSs:

48. Major Types of VMSs:
3.Administrated VMS
“A vertical marketing system that coordinates successive
stages of production & distribution, not through common
ownership or contractual ties, but through the size &
power of one of the parties.”

49. Horizontal Marketing System
“A channel arrangement in which two or more companies at one
level join together to follow a new marketing opportunity.”
Companies can combine their financial, production, or
marketing resources to accomplish more than any one company
could alone.
They might joint forces with competitors or noncompetitors
They may also work well globally.

50. Multichannel Distribution System
“A distribution system in which a single firm sets up two
or more marketing channels to reach one or more
customers segments.”
Companies expand their sales & market coverage &
gain market opportunities.
Such systems are hard to control as they generate more
conflicts.

51. Producer
Consumer
Segment 4
Consumer
Segment 3
Consumer
Segment 2
Consumer
Segment 1
Distributer
Dealers
Retailers

52. Channel Design Decision
Extremely important decision
It calls for:
Analyzing Customer need
Setting Channel Objectives
Identifying Major Channel Alternatives
Evaluating the Major Alternatives

53. 1. Analyzing Customer Needs
Marketing Channel are the part of overall Customer Value Delivery
Network. It starts with finding out:
What target consumers want from the channel?
Do consumers want to buy from near by locations or are they willing
to travel to more distant centralized locations?
Would they rather buy in person, over the phone, through the mail, or
online?
Do they value breadth of assortment or do they prefer specialization?
Do consumers want many add-on-services?
The faster the delivery, the greater the assortment provided, & the more
add-on-services supplied, the greater the channel’s service level.

54. 2. Setting Channel Objectives
Companies should decide which segments to serve & the
best to channel to use in this case.
The nature of company, its products, its market
intermediaries, its competitors & the environment influence
the company’s channel objectives.
Companies selling perishable goods require more direct
marketing channel.
The companies may compete in or near the same outlet that
carry competitors products.
Environmental factors such as economic conditions & legal
constraints may affect channel design & decisions.

55. 3. Identifying Major Alternatives
The company should identify its major alternatives in terms of
type of intermediaries, the number of intermediaries, & the
responsibilities of each channel member.
1.Types of intermediaries:
The company should identify the types of channel members
available to carry out its channel work. The following channel
alternatives might emerge:
Company Sales Force
Manufacturer’s Agency
Industrial Distribution

56. 2.Number of Marketing Intermediaries:
Companies must determine the number of channel members to
use at each level. Three strategies are available:
Intensive Distribution
Exclusive Distribution
Selective distribution
3.Responsibilities of Channel Members:
Producers & intermediaries must agree upon the terms &
responsibilities of each channel member like price policies,
conditions of sale, territorial rights & specific services.

57. 4. Evaluating the Major Alternatives
A company must evaluate its major alternatives against
1.Economic Criteria:
Comparing the sales, costs & profitability of different channel
alternatives.
2.Control Issues:
Giving intermediaries some control over the marketing of
products.
3.Adaptive Criteria:
Channels involve long-term commitments to keep the channel
flexible so that it can adapt to environmental changes.

58. Communicating Customer Value

59. Promotion
Mix
Advertising
Public
Relation
Personal
Selling
Direct
Marketing
Sales
Promotion

60. 1.Advertising
“Any Paid form of non personal presentation &
promotion of ideas, goods or services by an identified
sponsor.”
It includes Broadcast, Print, Internet, Outdoor & other
forms.

61. 2. Sales Promotion
“Short-term incentives to encourage the purchase or
sale of a product or service.”
It includes Discount, coupons, Displays &
Demonstration.

62. 3. Public Relation
“Building good relations with the company’s various
publics by obtaining favorable publicity, building up a
good corporate image & handling or heading off
unfavorable rumors, stories & events.”
It includes Press Releases, Sponsorship, Special Events
& Web Pages.

63. 4. Personal Selling
“Personal presentation by the firm’s sale force for the
purpose of making sales & building customer
relationship.”
It calls for Sales Presentation, Trade Shows &
Incentive Programs.

64. 5. Direct Marketing
“Direct connection with carefully targeted individual
consumers to both obtain an immediate response &
cultivate lasting customer relationship.”
It highlights Catalogs, Telephone Marketing, Kiosks,
Internet & more.

65. Sender
Media
Encoding
Noise
Decoding Receiver
ResponseFeedback
Message
Process of Communication
Sender’s Field Receiver's Field

66. Steps in Developing
Effective Communication

67. 1. Identifying the Target Audience
Communications initiates with a clear target audience.
It may be:
Potential Buyers
Current Users
Individuals
Groups
Special Publics
General Public
Target Audience Influence Heavily on:
What, When, Where, Who & how a message should be conveyed.

68. 2. Setting Communication objectives
The communicators must set the objectives on the base of
following six factors to be achieved from the buyers. These
are:
Awareness
Knowledge
Liking
Preference
Conviction
Purchase

69. 3. Designing a Message
A message should follow AIDA Model which calls for
Attention
Interest
Desire
Action
Message designing involves two main stages:
Message content (what to say)
Message Structure & Format (how to say)

70. Message Content
A message should have some appeals or themes for achieving the
desired results
The appeals may be:
Rational Appeals
These are related to audience self-interest. Such appeals explain the
product’s quality, economy, value & performance.
Emotional Appeals
These are attempt to stir up emotions that can motivate purchases.
These can be positive emotional appeals like love, pride, joy & humor
Or negative like fear, guilt & shame.
Moral Appeals
These are directed to audience sense of what is right & proper.

71. Message Structure
Major message structure issues involves:
Whether to draw conclusion or leave on to the audience
Whether to present the strongest arguments first or last
Whether to present a one-sided or two-sided argument
Message Format
In a print ad; the headline, copy, illustration, colors, pictures,
message size, position, shape & movement etc
On air ad; words, sound, voices & background music etc
In a television ad; facial expressions, gestures, postures, dress,
hairstyle, age etc

72. 4.Choosing the Media
The communicator must now select channels of
communication. It has two broad
communication channels:
Personal Communication Channel
Non Personal Communication Channel

73. Personal Communication Channel
“It calls for two or more people communicating
directly with each other, including face to face,
on the phone, through mail or e-mail or even
through an internet chat.”
Channels interact either:
Directly with the target buyers
Through independent experts
Consumer advocates
Online buying guides
Others making statement to buyers

74. Modes of Personal Communication
1.Word-of-Mouth Influence:
“Personal Communication about a product between
target buyers & neighbors, friends, family members &
associates.”
2.Buzz Marketing:
“Cultivating opinion leaders & getting them to spread
information about a product or service to others in their
communities.”

75. Non Personal Communication Channel
“It involves media that carry messages without
personal contact or feedback, including major
media, atmospheres & events.”
It includes:
Print Media (newspapers, magazines, direct mail)
Broadcast Media (radio, television)
Display Media (billboards, signs, posters)
Online Media (e-mail, website)

76. 5.Selecting the Message Source
Messages delivered by highly credible sources are more
persuasive
They might hire Doctors, Dentists, Healthcare Providers,
Superstars, Celebrities, Leaders, Well-known Athletes, Actors
even Cartoon Characters etc.
For Example:
Shahid Afridi promoting Head n Shoulders
Cartoon Characters like in the ads of Safeguard, Dew,
DingDong Bubble, Nestle Cerelac, Tetra Packs of milk,
Ali Zafar in the ad of Mobilink Jazz
Filmstar Shan in the ad of Lipton Tea

77. 6.Collecting Feedback
Feedback on marketing may suggest changes in the promotion
program or in the product offer itself.
The marketer wants to know:
Whether the target market remember the message
How many times they saw it
What points they recall
How they felt about message
How many customers bought a product
How many people talked to others about it
How many people visited the store
The result suggest either the promotion is creating awareness or
providing the expected satisfaction or not.

78. Setting Promotion Budget & Mix
One of the hardest marketing decision faced by a company is
to how much to be spend on promotion budget.
Four methods are devised to set the promotion budget
Affordable Method
Percentage-of-Sales Method
Competitive-Parity Method
Objective-&-Task Method

79. 1.Affordable Method:
“Setting the promotion budget at the level management thinks the
company can afford.”
Usually, small companies adopt this method. They start with total
revenues, deduct operating expenses & capital outlays & then devote
some portion of remaining funds to advertising.
Demerits:
Ignores the effect of promotion on sales.
Places promotion last among spending priorities.
Leads to an uncertain promotion budget, which makes long-run
planning difficult.

80. 2.Percentage-of-Sales Method
“Setting the promotion budget at a certain percentage of
current or forecasted sales or as a percentage of the unit
sales price.”
Merits:
Simple to use
Helps creating relationship between promotion spending,
selling price & profit per unit.
Demerits:
Wrongly views sales as the cause of promotion rather than as
the result.
Based on availability of funds not on opportunities
As budget varies year-to-year , long-range planning is
difficult
No any specific bases for choosing percentage

81. 3.Competitive-Parity Method
“Setting the promotion budget to match the competitors’ outlays.”
Merits:
Represents collective wisdom of industry
Prevents promotion wars
Demerits:
No grounds for believing that the competitors has better idea of what a
company should spend on promotion than does the company itself.
Each company has its own promotional needs
No evidence that this method prevents promotion wars.

82. 4.Objective-&-Task Method
“Developing the promotion budget by:
Defining specific objectives
Determining the task that must be performed to achieve
these objectives
Estimating the cost of performing these task.”
Merits:
Forces management to spell out its assumption about the
relationship between dollar spent & promotion result
Demerits:
Hard to figure out which specific task will achieve stated
objectives.

84. Advertising
“Any paid form of
nonpersonal presentation &
promotion of ideas, goods or
services by an identified
sponsor through medium.”
Advertising is not only used
by business firms but a wide
range of not-for-profit
organizations, professionals
& social agencies also use
advertising
It involves four major &
important decisions when
developing an advertising
program. These are:
Setting Advertising
Objectives
Setting Advertising
Budget
Developing Advertising
strategy
Evaluating Advertising
Campaigns

85. Setting Advertising
Objectives

86. Step 1
“A specific communication task to be accomplished with a
specific target audience during a specific period of time.”
Bases of Objectives:
Target Market
Positioning
Marketing Mix
Primary Purposes of Advertising Objectives:
Informative
Persuasive
Reminder

87. Setting the
Advertising Budget

88. Step 2
“The dollars or other resources allocated to a product or
company advertising program.”
Advertising budget depends on:
Stages in the Product Life Cycle
Market Share
Undifferentiated Brands-requiring high budget to achieve
competitive edge

89. Developing
Advertising Strategy

90. Step 3
“The strategy by which the company accomplishes its
advertising objectives.”
It consists of two major elements;
Creating Advertising Message
Selecting Advertising Media
In today’s world advertising is the most important
function performed by the media-planners

92. Advertising succeeds only when it gains attention &
communicates well
An effective advertising message strategy develops with:
Identifying Customer benefits
Creative Concept
Advertising Appeals-meaningful, believable, distinctive
Execution Style
Tone
Attention-getting Words
Format Elements

93. Execution
Style
Slice of
Life
Lifestyle
Fantasy
Mood or
Image
Musical Personality
Symbol
Technical
Expertise
Scientific
Evidence
Testimonial
Evidence

95. Advertising Media
“The vehicles through which advertising messages
are delivered to their intended audience.”
It is selected by:
Deciding on Reach, Frequency & impact.
Choosing among major media types
Selecting specific media vehicles
Deciding on media timing

96. Reach:
Measure of percentage of people in the target market who are
exposed to the ad campaigns
Frequency:
Measure of how many times an average person is exposed to
the message
Media Impact:
Qualitative value of a message exposure through a medium.
Media Types:
Television, Newspapers, Direct Mail, Magazines, Radio,
Outdoor & Internet

97. Media Vehicles:
It calls for selecting a specific media within each
general media type
For example: which TV Channel is suitable for the ad
Media Planners evaluate media vehicles on the basis of:
Audience Quality
Audience Engagement
Editorial Quality
Media Timings:
The firms either;
Follow the seasonal patterns
Oppose the seasonal patterns
Same all year
Continuity & Pulsing are the patterns of Ad.

99. Step 4
“It calls for the net return on advertising investment
divided by the costs of the advertising investment.”
Advertisers evaluate two types of
results:
The Communication Effects
The Sales & Profit Effects