Small description of Pricing techniques and Price adaptation strategy.

1. Pricing Methods
and
Price adaption
strategies
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Presented By:- DharmjitSinh Jadeja
Enrollment No:- 18SOMBA21012
Presented to:- Pro. Nirav Mandavia

2. Table of content
• What is price – Page no.3
• Methods of pricing – Page no.4
• Markup Pricing – Page no.5
• Target-return pricing – Page no.6
• Perceived-value pricing – Page no.8
• Value pricing – Page no.10
• Going-rate pricing – Page no.11
• Auction-type pricing – Page no.12
• Price adaptation – Page no.14
• Geographical Pricing – Page no.16
• Discounts/Allowances– Page no.17
• Promotional Pricing– Page no.18
• Differentiated Pricing– Page no.19
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3. What is pricing
• In Simple Sense “Price is the amount of money charged for a
product or a service”.
• As per PHILIP KOTLER “Price is the sum of all the values
that customers give up to gain the benefits of having or
using a product or a service”.
• Price is the only element in the marketing which produces revenue; all other elements
represent cost.
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4. Pricing methods
•Markup pricing
• Target-return pricing
•Perceived-value pricing
• Value pricing
•Going-rate pricing
• Auction-type pricing
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5. Markup pricing
The Mark-up pricing is the method of adding a certain
percentage of a markup to the cost of the product to
determine the selling price.
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6. Target-return pricing
The Target-Return Pricing is a method wherein the firm determines the price on the basis of
a target rate of return on the investment i.e. what the firm expects from the investments
made in the venture. Here, the firm calculates the amount invested in the business activities
and then determine the return they expect from these assuming a particular quantity of the
product is sold.
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7. Formula
Target-Return Pricing
= unit cost + (desired return x invested
capital) /unit sales
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8. Perceived-value pricing
In Perceived-Value Pricing method, a firm sets the price of a product by
considering what product image a customer carries in his mind and how
much he is willing to pay for it.
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9. Example
Price is Rs.7,199Price is Rs.1,11,900
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10. Value pricing
Under Value pricing method companies design the low priced
products and maintain the high-quality offering. Here the prices
are not kept low, but the product is re-engineered to reduce the
cost of production and maintain the quality simultaneously.
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11. Going-rate pricing
GOING-RATE PRICING
The Going-Rate Pricing is a method adopted by the firms wherein the product
is priced as per the rates prevailing in the market especially on par with the
competitors. This type of pricing is mostly followed in Oligopolistic industries
where they deal in homogenous goods, and in which less variation is seen from
one producer to another.
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12. Auction-type pricing
Auction-type pricing method is growing popular with
the more usage of internet. Several online sites such
as eBay, Quiker, OLX, etc. provides a platform to
customers where they buy or sell the commodities.
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13. Types of auction
1. English Auctions- There is one seller and many buyers. The seller
puts the item on sites such as Yahoo and bidders raise the price until the top
best price is reached.
2. Dutch Auctions- There may be one seller and many buyers or one
buyer and many sellers. In the first case, the top best price is announced and
then slowly it comes down that suit the bidder whereas in the second kind
buyer announces the product he wants to buy then potential sellers competes
by offering the lowest price.
3. Sealed-Bid Auctions- This kind of method is very common in the
case of Government or industrial purchases, wherein tenders are floated in
the market, and potential suppliers submit their bids in a closed envelope, not
disclosing the bid to anyone.
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14. Price adaptation
• Price adaptation is the ability of a business to change its pricing
models to suit different geographic areas, consumer demands
and prevailing incomes. Marketing plays a significant role in
price adaptation because pricing strategy is one of the four main
components in determining product positioning, which is how a
company chooses to present products to consumers and generate
interest. The more adaptability a business has, the better chance
it has of appealing to more consumers.
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15. Price-Adaptation Strategies
•Geographical Pricing
• Discounts/Allowances
•Promotional Pricing
• Differentiated Pricing
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16. Geographical Pricing
Geographical pricing is adjusting an item's sale price based on the buyer's
location. Sometimes the difference in sale price is based on the cost to ship the
item to that location or what the people there are willing to pay. Companies
will try to maximize revenue in the markets in which it operates, and
geographical pricing contributes towards that goal.
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17. Discounts/Allowances
• Pricing Allowance The purpose of giving allowances or discounts is to tackle competitors.
However, discounting can be dangerous if not controlled properly.
• The types of discounts being offered fall in the categories below:
1. Cash and settlement discounts
2. Quantity Discounts
3. Promotional Discounts
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18. Promotional Pricing
• Price promotions or promotional pricing is the sales promotion technique which involves
reducing the price of a product or services in short term to attract more customers & increase
the sales volume.
• Sometimes buy one get one free scheme is used.
• Example: -
• Buy one get one free
• Sale with 20% or 30% off etc.
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19. Differentiated Pricing
• Companies often adjust their basic price to accommodate differences in customers, products,
locations, and so on. Price discrimination occurs when a company sells a product or service at two or
more prices that do not reflect a proportional difference in costs.
• In first-degree price discrimination, the seller charges a separate price to each customer depending
on the intensity of his or her demand.
• In second-degree price discrimination, the seller charges less to buyers who buy a larger volume.
• In third-degree price discrimination, the seller charges different amounts to different classes of
buyers.
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