This document discusses various aspects of pricing strategies. It defines price as the amount of money charged for a product or service. It then discusses different types of pricing strategies such as customer value-based pricing, good value pricing, value-added pricing, cost-based pricing including cost-plus pricing and break-even pricing, and competition-based pricing. It also discusses internal factors like costs and objectives and external factors like demand, competition, and regulations that affect pricing decisions.

1. Pricing
Dr. Gopal Thapa

2. Price
 Price is the amount of money charged for a
product or a service.
 Price is the money paid for the value of a product
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3. Price
 Interest
 Rent
 Salary
 Wages
 Tax
 Fare
 Commission
 Premium
 Fee etc
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4. Price
 Price is the sum of all the values that customers
give up to gain the benefits of having or using a
product or service
 Philip Kotler
 Price is the amount of money and or other items
with utility needed to acquire a product.
 Stanton
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5. Price
 Price is the only element in the marketing mix that
produces revenue
 All other elements represent costs.
 Price is also one of the most flexible marketing
mix elements.
 Price has been the major factor affecting buyer
choice
 Price determine a firm’s market share and
profitability
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6. Price
 Price plays a key role in creating customer value
and building customer relationships
 Smart managers treat pricing as a key strategic
tool for creating and capturing customer value
 A small percentage improvement in price can
generate a large percentage increase in
profitability
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7. Major Pricing Strategies
 Customer value based pricing
 Good value pricing
 Value added pricing
 Other pricing strategies
 Cost based pricing
 Competition based Pricing
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8. Customer Value Based Pricing
 Customer value–based pricing uses buyers’
perceptions of value as the key to pricing.
 Value-based pricing means that the marketer
cannot design a product and marketing program
and then set the price.
 Price is considered along with all other marketing
mix variables before the marketing program is set.
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9. Customer Value Based Pricing
 Assess customer needs and value perceptions
 Set target price to match customer perceived value
 Determine costs that can be incurred
 Design product to deliver desired value at target
price
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10. Customer Value Based Pricing
 Good-value pricing
 Value added pricing
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11. Good Value Pricing
 The Great Recession of 2008 to 2009 caused a
fundamental and lasting shift in consumer attitudes
toward price and quality.
 In response, many companies have changed their
pricing approaches to bring them in line with changing
economic conditions and consumer price perceptions.
 More and more, marketers have adopted the strategy
of good-value pricing—offering the right combination
of quality and good service at a fair price.
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12. Good Value Pricing
 In many cases, this has involved introducing less-
expensive versions of established brand name
products or new lower-price lines.
 An important type of good-value pricing at the
retail level is called everyday low pricing (EDLP).
 EDLP involves charging a constant, everyday low
price with few or no temporary price discounts.
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13. Good Value Pricing
 In contrast, high-low pricing involves charging
higher prices on an everyday basis but running
frequent promotions to lower prices temporarily
on selected items.
 Eg. Daraj 11.11 sales
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14. Value Added Pricing
 Value-based pricing doesn’t mean simply
charging what customers want to pay or setting
low prices to meet competition.
 Instead, many companies adopt value-added
pricing strategies.
 Rather than cutting prices to match competitors,
they add quality, services, and value-added
features to differentiate their offers and thus
support their higher prices.
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15. Cost Based Pricing
 Whereas customer value perceptions set the price
ceiling, costs set the floor for the price that the
company can charge.
 Cost-based pricing involves setting prices based
on the costs of producing, distributing, and selling
the product plus a fair rate of return for the
company’s effort and risk.
 A company’s costs may be an important element
in its pricing strategy
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16. Break Even or Target Profit
Pricing
 Break even pricing is the practice of setting a price
point at which a business will earn zero profits on
a sale.
 Break even point is no profit – no loss point
 BEP = Fixed cost/ contribution margin per unit
 BEP= Fixed cost/ p/v ratio
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18. Cost Based Pricing
 Cost-Plus Pricing (Mark up pricing)
 Break even or target profit pricing
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19. Cost-Plus Pricing (Markup
Pricing)
 It is the simplest method of pricing
 It is adding a standard markup to the cost of the
product.
 For example:
 Variable cost Rs.10
 Fixed costs Rs. 300,000
 Expected unit sales 50,000
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20. Cost-Plus Pricing (Markup
Pricing)
 Unit cost = variable cost + fixed cost/Unit
sales
 Unit cost = Rs.10 + Rs. 300000/50000
 = Rs. 16
 Markup price = unit cost/ (1 - desired return
on sales)
 = 16 /1 - 0.2
 = 20
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21. Competition Based Pricing
 Meet competition
 Below competition
 Above competition
 Sealed-bid pricing
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22. Internal and External Considerations
affecting Pricing Decisions
 Internal Factors
 Pricing objectives
 Costs
 Other elements of marketing mix
 Organization structure
 External Factors
 Market demand
 Competition
 Market intermediaries
 Government
 Pressure groups
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