Pricing is an important business decision that directly affects revenues. There are many internal and external factors that must be considered when setting prices, including objectives, costs, competition, and demand. Some common pricing strategies include penetration pricing, premium pricing, bundle pricing, psychological pricing, promotional pricing, and dynamic pricing. The objectives and factors affecting price are analyzed to determine the optimal pricing strategy.

2. Contents
• Introduction
• Objectives
• Factors Affecting Price Decision
• Pricing Strategy

4. Introduction
• Pricing is simply the “money charged for a product
or service”.
• It is everything that a “ customer has to give up” in
order to acquire a product or service.
• The “price is not the same thing as cost”.
• Pricing is “one of the most important business
decisions” management take.

5. • Unlike other elements of marketing mix, “pricing decisions directly
affect revenues rather than costs”.
• There are so many factors to consider, and much uncertainty about
whether a price change will have the desired effect.

6. Price
• Price is the value that is put to a product or service and is the result of a complex
set of calculations, research and understanding and risk taking ability.
• Philip Kotler define“ Price is the amount of money charged for a product or
service.”
• Stanton define “ Price is the amount of money or goods needed to acquire
some combination of another goods and its accompanying services.”

7. Pricing Decisions
Pricing Decision is the process whereby a
business sets the price at which it will sell its
products and services, and may be part of the
business's marketing plan.
In setting prices, the business will take into
account the price at which it could acquire the
goods, the manufacturing cost, the market place,
competition, market condition, brand, and quality
of product.

8. Objectives of Pricing
1. Survival
2. Profit Maximization
3. Return on investment (ROI)
4. Sales growth
5. Growth in market share
6. Market Skimming Objectives
7. Competitive Effect Objectives
8. Image Differentiation
9. Customer Satisfaction Objectives

9. Factors affecting Price Decisions
Internal Factors
• Business Objectives
• Cost of the Product
• Marketing Mix
• Product Differentiation
• Organizational Factors
External Factors
• Demand
• Competition
• Government policy
• Suppliers
• Buyer behaviour
• Economic condition

10. Internal Factors
• The internal factors are factors that can be control, determine and process by the
organisation.
• This factors are mostly in relation with the organisation business level strategy and
greatly influenced by the nature of business.

11. Business Objectives
• A firm may have various objectives and pricing
contributes its share in achieving such goals.
For example, contribution to society, education,
charity etc.
• Pricing policy should be established only after
proper considerations of the objectives of the
firm.

12. Cost of the product
Pricing decisions are based on the cost of the production. If a product is priced less
than the cost of production, the firm has to suffer the loss. But the cost of
production can be reduced, by co-ordinating the activities of production properly,
the firm can reduce the price accordingly

13. Marketing Mix
• Price is the important element in marketing
mix.
• A shift in any one of the elements has an
immediate effect on the other three – Product,
Place, Promotion, Price.
• The effort for implementing strategies will
not succeed unless the price change is
combined with a total marketing strategy that
supports it.

14. Product Differentiation
• The price of the product also depends upon the
characteristics of the product.
• In order to attract the customers, different
characteristics are added to the product, such as
quality, size, colour, attractive package,
alternative uses etc.
• Generally, customers pay more prices for the
product which is of the new style, fashion, better
package etc.

15. Organizational Factors
• Pricing decisions occur on two levels in the organisation. Overall price strategy is
dealt with by top executives. They determine the basic ranges that the product falls
into in terms of market segments.
• The actual mechanics of pricing are dealt with at lower levels in the firm and focus
on individual product strategies. Usually, some combination of production and
marketing specialists are involved in choosing the price.

16. External Factors
• The external factors are those factors that are not within reach of the organisation.
They are external because there are many parties that determine and control these
factors.
• The business organisation is a party to the external factor and cannot control or
determine the aggregate indicators of these factor.

17. Demand
Some companies who receive order from customers may decide to reduce their price
per unit or increase their discount, when it is noted that demand from a customer is
high, and this may be on the other way round, depending on other factors considered
by the management.

18. Competition
• Competition is a crucial factor in price determination.
• A firm can fix the price equal to or lower than that of the competitors, provided the
quality of product, in no case, be lower than that of the competitors.

19. Government policy
• Pricing Decision is also affected by the price-control by the government through
enactment of legislation.
• The prices cannot be fixed higher, as government keeps a close watch on pricing
in the private sector. The marketers obviously can exercise substantial control over
the internal factors, while they have little, if any, control over the external ones.

20. Suppliers
• Suppliers of raw materials and other goods can
have a significant effect on the price of a
product.
• The price of a finished product is intimately
linked up with the price of the raw materials.
• Scarcity or abundance of the raw materials also
determines pricing.

21. Buyers behaviour
• The various consumers and businesses that buy a company’s products or services
may have an influence in the pricing decision.
• Their nature and behaviour for the purchase of a particular product, brand or
service etc. affect pricing when their number is large.

22. Economic condition
• The inflationary or deflationary tendency affects pricing.
• The prices are increased in boom period to cover the increasing cost of production
and distribution. To meet the changes in demand, price etc.

25. Penetration pricing
• Penetration pricing is a marketing strategy used
by businesses to attract customers to a new
product or service by offering a
lower price during its initial offering. The
lower price helps a new product or
service penetrate the market and attract
customers away from competitors.
• Ex: Reliance mobile

26. Freemium pricing
• Freemium pricing—a mix of the words
“free” and “premium”—is
a pricing strategy that businesses use if
they want to offer customers free
services in addition to paid options. ...
It can also apply to companies that
offer a free trial of their services.
• Ex: Netflix, Audiobook

27. Premium pricing
• Premium pricing is a strategy that
involves tactically pricing your company's
product higher than your immediate
competitor.
• The purpose of pricing your product at
a premium is to cultivate a sense in the
market of your product being just that bit
higher in quality than the rest.
• Ex: iPhone, Gucci, Starbucks

28. Skimming Pricing
• Price skimming is a
product pricing strategy by which a
firm charges the highest
initial price that customers will pay
and then lowers it over time.
• Ex: Mobile Phones

29. Economy pricing
• Economy pricing is a method of pricing in which a low price is assigned to a
product with decreased production costs.
• Ex: Generic food sold at grocery stores

30. Bundle Pricing
• The organizations bundles a group of products at a reduced price.
• Common methods are buy one get one free promotions.
• Ex: These strategy is very popular in supermarket, KFC

31. Psychological pricing
• A pricing strategy that specialises influencing psychological effects on consumers.
• It is a marketing strategy based on utilising particular techniques to form a
psychological impact on consumers
• Ex: Odd pricing

32. Promotional pricing
• Promotional pricing is a sales strategy in which brands temporarily reduce
the price of a product or service to attract prospects and customers. By lowering
the price for a short time, a brand artificially increases the value of a product or
service by creating a sense of scarcity.
• Ex: Free samples

33. Dynamic pricing
• Dynamic pricing is a partially technology-based pricing system under
which prices are altered to different customers, depending upon their
willingness to pay.
• Several examples of dynamic pricing are: Airlines. ... Thus, many
different prices may be charged for seats on a single flight. Hotels.

35. Pay-What-you-want
• Pay-as-you-want a pricing strategy that lets customers decide how much they want to pay.
• Ex: Wikipedia
• Wikipedia, the giant online encyclopaedia, has used the PWYW model for years. Wikipedia is free to
access, but always allows users to donate any amount they want to support the hosting and editing of
the pages. They also run donation drives a few times each year where they prompt users to pay
whatever they can to help keep Wikipedia running.
• For Wikipedia, the PWYW model has been a tremendous success, helping them raise more than $112
million during the 2018-19 donation run.

37. Conclusion
• It is that the marketing manager decide the objective of pricing before
actually setting price.
• According to experts, pricing objective are overall role of price in an
organizations long run plans. The objectives help the marketing
manager as guideline to develop marketing strategies.

38. Reference
• https://www.businessmanagementideas.com/
• https://www.yourarticlelibrary.com/
• https://www.google.com/
• https://en.wikipedia.org/
• Agricultural And Food Marketing Management- Agriculture Department