2. ROLE AND IMPORTANCE OF PRICING
The only element that generates revenue
Price and sales volume together decide the revenue of any business.
Major determinant of a buyer’s choice.
In the last few decades, non price factors become quite important
Still it remains an important factor in determining sales and profitability.
3. CHANGING PRICING ENVIRONMENT
‘We want LG to be an aspirational brand’
Repositioning of LG Electronics
“Value for money” “Aspirational”
Source- http://www.thehindubusinessline.in/catalyst/2007/11/22/stories/2007112250010100.htm
5. INTERNAL FACTORS
Corporate and marketing objectives of the firm
The image sought by the firm though pricing
The characteristics of the product
The stage of the product in its life cycle
Use patterns and turnaround rate of the product
6. INTERNAL FACTORS
Costs of manufacturing and marketing
Extent of distinctiveness of the product and extent of differentiation practiced
Other elements of marketing mix and their interaction with pricing
Composition of the product line of the firm
7. EXTERNAL FACTORS
Market characteristics
Price elasticity of demand of the product in particular
Buying behaviour of the customers of the product
Bargaining power of major customers
Bargaining power of major suppliers
8. EXTERNAL FACTORS
Competitors’ pricing strategies
Government controls/regulation on pricing
Other relevant legal aspects
Societal views
Understanding reached, if any, with competitors/ price cartels
9. PRICING OBJECTIVES
Profit maximization in the short term
Profit optimization in the long term
A minimum return on investment
A minimum return on sales turnover
Achieving a particular sales volume
10. PRICING OBJECTIVES
Achieving a particular market share
Deeper penetration of the market
Entering new markets
Target profit on the entire product line, irrespective of profit level of
individual product
11. PRICING OBJECTIVES
Keeping competition out, or keeping it under check
Keeping parity with competition
Fast turnaround and early cash recovery
Stabilizing the prices and margins in the market
12. PRICING OBJECTIVES
Providing the commodity/service at prices affordable by the weaker
sections
Providing the commodities/services at prices that will stimulate
economic development
20. PRICE VARIABLES
Cost reduction using new technology or by using cheaply available
raw material
Two alternatives based competitive market conditions – reduce the
market price of product or raise the market price
21. PRICE VARIABLES
Lowering price – too low price leads to loss, same policy can be
adopted by rival producers/ competitors
Raising price – Reduce market demand considerably
22. NON-PRICE VARIABLES
Not concerned with price
Product modification, effective advertising and sales
promotion measures
Priority to non price variables for facing competition and
capturing market
23. NON-PRICE VARIABLES
Product differentiation –
Registered trade mark, copy right, patents right,
Change in appearance of the product i.e. colour, packaging, etc.,
Provision of supplementary services
24. NON-PRICE VARIABLES
Selling costs –
Expenditure incurred on advertising, sales promotion, discounts,
Incentive measures to sales force and so on.
Persuade customers to prefer firm’s products as against the products of competitors
25. PRODUCT LIFE CYCLE & PRICING
DECISIONS
Introduction stage
Rapid skimming strategy – High price and heavy promotional expenses
Slow skimming strategy – High price and low promotional expenses
Rapid penetrations strategy – Low price and heavy promotional expenses
Slow penetration strategy – Low price and low promotional expenses
26. PRODUCT LIFE CYCLE & PRICING
DECISIONS
Growth Stage
Penetration pricing as increase in sales volume and competition
Maturity stage
Pricing based on what consumers can bear and best competitor’s offerings
Extended warranties, lowering of price
Declining stage
Low pricing
