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Pricing ppt.ppt good for 1st year students
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- 2. Elements & Sub-elementsof Marketing Mix
- 3. PRICE Is the amountof money charged for a good or service The only marketing mix element that produces revenue Changing too much chases away potential customers, charging too little cuts revenue
- 4. Importance of Pricing Pricingaffects the profitability position of the firm Price affects Demand Its Quantitative : High priced are perceived as better quality Promotion expenditure increases the price of the product.
- 5. Objectives of PricingStrategies • To increase profits of the company • To increase sales of the company • To increase market share • Discourage market entry by competitors • Create perception of brand quality and exclusiveness • Encourage trial purchase- When company launches a product, its price should be attractive to customers to buy.
- 6. Factors considered whensetting price Customer perceptions of value • Marketing strategy • Objectives • Marketing mix • Nature of the market • Demand • Competitor’s strategies and prices Product costs Price Ceiling: No demand above this price. Price Floor: No profits below this price.
- 8. Internal Factors: MarketingMix and Marketing Objectives ● Survival ● Maximum Profit ● Maximum Market share ● Product Quality
- 9. Internal Factors :Cost ● Costs involved in research and development, testing, promoting and packaging should be covered. ● Break-even point
- 17. The Pricing Process selecting the finalprice selecting pricing method analyzing competitors costs, prices and offers estimating costs determining demand selecting the price objective
- 18. Value based pricingvs Cost based pricing
- 19. New-Product Pricing Strategies 1.Skimming pricing • Charging a high price initially and reducing the price over time • Commonly used when introducing new & innovative products in the region 2. Penetration pricing • Charging a low price when entering the market to capture market share • Used when competitors are closing in with similar or better products 6
- 20. Pricing Methods • Costbased pricing • Target Return Pricing • Competition based pricing • Demand based pricing • Perceived value pricing Variable cost per unit: Rs 10 Fixed Cost: 2,00,000 Expected Sales 40,000 units UNIT COST= Variable Cost+ Fixed Cost/Unit Sales =15/- If Manufacturer needs 20% Mark up Mark up Price= Unit Cost/(1-20%) = 18.75/- Methods Essentially, the price of a product is determined by adding a percentage of the manufacturing costs to the selling price to make a profit.
- 21. Pricing Methods • Costbased pricing • Target Return Pricing • Competition based pricing • Demand based pricing • Perceived value pricing – – Target Return Pricing= Unit Cost + ( rate of Return X Capital Investment)/Expected sales – – 15+ 20/100 X 8,00,000/40,000 = 19 – Profit= 4/- X 40,000 Methods 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.
- 22. Pricing Methods • Costbased pricing • Target Return Pricing • Competition based pricing • Demand based pricing • Perceived value pricing This is setting price in relation to competitor A) Going Rate Pricing- Customary Pricing (large no. of firms selling similar product) A)Sealed Bid Pricing: 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. Methods
- 23. Pricing Method • Costbased pricing • Target Return Pricing • Competition based pricing • Demand based pricing • Perceived value pricing Demand based pricing: Firm considers the pattern of demand of the product Perceived value pricing: Here the buyer’s perception of value is important for pricing and not the seller’s cost Methods
- 24. Happy Meal: What soHappy about its Pricing????