The document discusses various pricing strategies that can be used by companies. It defines price and explains that pricing is the only marketing mix element that generates revenue. It then outlines the key steps in setting a price: selecting objectives, determining demand, estimating costs, analyzing competitors, selecting a pricing method, and determining the final price. Finally, it provides examples of specific pricing strategies like premium pricing, penetration pricing, product bundle pricing, and the freemium model.

1. MONEY
HONEY
PRICING STRATEGY
Aravind T S
LEAD College of Management

2. WHAT IS MEANT BY PRICE ?
 price is the quantity of payment or
compensation given by one party to another
in return for goods or services.

3. Revenue
generatin
g

4. PRICING
 The only part of marketing mix that is
revenue generating all the others are cost
 Pricing is the process of determining what a
company will receive in exchange for its
products .

5. SETTING THE PRICE
1. Selecting objective
2. Determining demand
3. Estimating costs
4. Analyzing competitors cost,price and offers
5. Selecting a pricing method
6. Selecting final price

6. STEP.1 – SELECTING PRICING OBJECTIVE
 Survival :-Short term pricing objective are set in order to survive
 Profit :- The objective is to maximise profit
 Return on investment :-Price are set to attain a specified return on the
companies investment
 Maximum market share :- Higher sales volume will lead to lower unit
costs and higher long-run profit. They set the lowest price (IKEA)
 Maximum market skimming :- companies unveiling a new technology
favour setting high price to maximise market skimming .price starts high
and slowly rollback
 Product quality leadership :- Starbucks , CCD, BMW , Mercedes,Taj
have positioned as leaders in quality , with premium pricing and very
loyal customer base

7. STEP.2 - DETERMINING DEMAND
 Each price will lead to a different impact on a
company’s marketing objective
Inelastic Demand:-the situation in which the
supply and demand for a good are
unaffected when the price of that good or
service changes.
Inelastic Demand : demand for
a product is sensitive to price
changes

8. ESTIMATING COST
 Fixed cost : salaries, rent ,intrest
 Variable cost : vary directly with the level of
production.
 Total cost : Fixed + Variable cost
 Average cost : Cost per unit .

9. ANALYZING COMPETITORS COST,PRICE AND
OFFERS
 The firm must take competitors cost , price
, and possible price reactions .

10. FIXING THE PRICING
 The price of the product should be
determined in such a way as to give a fair
return to the producer, a good margin to the
middlemen and a reasonable price to the
consumer .

11. PREMIUM PRICING
 Use a high price where there is a
unique brand.
 This approach is used where a substantial
competitive advantage exists and the
marketer is safe in the knowledge that they
can charge a relatively higher price

12. SKIMMING
 A very high price is fixed by a company for a
new product
 Earn max profit at earliest
 Deliberate to built up the image of quality and
prestige of the product .
 Only for specialty goods
 No competition , if yes then showing
competitive advtage

13. BAIT
 Two products are manufactured by a
firm, and the price of one product is kept low
and the price of the other product is kept high
.
 Selling high price product by showing the low
price
 Eg : Car, Fast food , Computers

14. PSYCHOLOGICAL PRICING.
 This approach is used when the marketer
wants the consumer to respond on an
emotional, rather than rational basis.
 For example Price Point Perspective (PPP)
0.99 Paise not 1 rupee.
 Eg:- Bata

15. PRODUCT LINE PRICING.
 Different products of different prices are
manufactured , but the price of all the
product are determined in a line
Say as :- 25,35, 40 etc

16. OPTIONAL PRODUCT PRICING
 Companies will attempt to increase the
amount customers spend once they start to
buy.
 For example airlines will charge for optional
extras such as guaranteeing a window seat
or reserving a row of seats next to each
other.

17. PROMOTIONAL PRICING.
 Pricing to promote a product is a very
common application. There are many
examples of promotional pricing including
approaches such as BOGOF (Buy One Get
One Free), money off vouchers and discount

18. PRODUCT BUNDLE PRICING.
 Here sellers combine several products in the
same package.
 his also serves to move old stock. Blu-ray
and videogames are often sold using the
bundle approach once they reach the end of
their product life cycle.

19. GEOGRAPHICAL PRICING.
 Geographical pricing sees variations in price
in different parts of the world.
 shipping costs increase price
 n some countries there is more tax on certain
types of product which makes them more or
less expensive

20. VALUE PRICING
 This approach is used where external factors
such as recession or increased competition
force companies to provide value products
and services to retain sales
 e.g. value meals at McDonalds and other
fast-food restaurants.
 http://www.youtube.com/watch?v=LX7gfhv2o
5U

21. PENETRATION PRICING
 The price charged for products and services
is set artificially low in order to gain market
share.
 http://www.youtube.com/watch?v=EPYOlJ9t
BHM

22. ECONOMIC PRICING
 This is a no frills low price. The costs of marketing and promoting a
product are kept to a minimum.
 Budget airlines are famous for keeping their overheads as low as possible and
then giving the consumer a relatively lower price to fill an aircraft. The first few
seats are sold at a very cheap price (almost a promotional price) and the middle
majority are economy seats, with the highest price being paid for the last few
seats on a flight (which would be a premium pricing strategy).
 http://www.youtube.com/watch?v=jmNrvlQ73pU

23. CHANGING PRICING ENVIRONMENT
Buyers can :
 Get instant price comparison from
thousand of vendors (Eg:
mysimon.com, flipcart,pricescan.com)
 Name there price and have it met
(priceline.com)
 Get products free : Free software movement
that started

24. FREEMIUM STRATEGY
 My space
 Skype
 Adobe gave away PDF reader for free in
1994

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