IIM Raipur

1. Pricing Strategies
Group 3:
Aayush Singh 15PGP002
Kumar Abhishek 15PGP118
Saurabh Kumar 15PGP046
Abhishek Nag 15PGP144
Harshita Jaiswal 15PGP017
Mohit Jethi 15PGP030

2. PRICE
• Value exchanged for products in marketing transactions; Not
necessarily money paid

3. • Key marketing mix element that relates directly to generation of
total revenue; other elements produce cost.
• Only flexible element in marketing mix that can be adjusted
quickly to respond to changes in the external environment unlike
product features and channel commitments.
• Price is still one of the most important elements determining
company’s market share and profitability
CONCEPT OF PRICE

4. PRICE vs. COST
• The price is the amount customers pay for a product while cost is the
expense incurred by the business in bringing the product to the
market.

5. Product
Place
Promotion
+ Profits = Price}
Generate Cost Generate
Revenue

6. Pricing
• Pricing is the process whereby a business sets the price at
which it will sell its products and services as a part of the
business's marketing plan.
• Firms need to take account of the cost of product when setting
price.
• In small companies, prices are often set by the company’s boss.
In large companies, pricing is handled by division and product-
line managers.

7. Role of Pricing
Role of
Pricing
Marketing
Strategy
Demand
Regulator
Revenue
Generator
Positioning
of Product
Input to
Decision
Making
Competitive
Weapon

9. Geographical Pricing
In geographical pricing, the company decides how to price its products to different customers in
different locations and countries.
• Point of Production Pricing
• Zone Delivered Pricing
• Freight-Absorption Pricing
• Uniform Delivered Pricing
• BASING Point Pricing
• MODES OF payment
• Counter trade
• Barter System
• Compensation Deal
• Buyback arrangement
• Point of Production Pricing
A manufacturer following this strategy quotes
the selling price up to his own factory, i.e., all
the freight costs from the factory to the
customer's place will be borne by the
customers

10. • Zone Delivered Pricing
This divides a seller's market into a limited number of broad geographic zones and then sets a
uniform delivered price for each zone
Recharge Coupon Price (in Rs.) Validity
200 NA
250 NA
350 NA
400 NA
500 NA
600 NA
1000 NA
Full Talk time Vouchers in Delhi-NCR Region
Recharge Coupon Price (in Rs.) Validity
120 NA
150 NA
200 NA
220 NA
300 NA
330 NA
350 NA
2500 NA
Full Talk time Vouchers in Mumbai Region

11. • Freight-Absorption Pricing
The seller absorbs all or part of the cost of transportation. This amounts to a” price discount, and is
used as a promotional tactic

14. Uniform Delivered Pricing
The same delivered price is quoted to all buyers regardless of their locations. This strategy is sometimes
referred to as "postage stamp pricing" because of its similarity to the pricing of first-class mail service

15. BASING Point Pricing
Certain cities are designated as basing points. All goods shipped from a given basis point are charged the
same amount.

16. Penetration Pricing
Penetration pricing is the practice of offering a low price for a new product or service during its initial
offering in order to attract customers away from competitors.
Penetration pricing is most commonly associated with a marketing objective of increasing market share or
sales volume, rather than to make profit in the short term.
Examples:
Penetration pricing in used two ways
• Willing to lose money on the new product as a way to get more
customers through the door
• Offer new products through their stores at prices much lower than
other stores

17. Parle G: Parle used price penetration owing to their strong distribution network. They had a very
wide reach and they used this advantage to the fullest.

18. TATA Sky (A joint venture of TATA And Sky TV) gained market leadership having the first mover
advantage. Soon they had mighty rivals like DISH TV, AIRTEL DIGITAL TV etc. So have an edge,
they launched various price cuts giving benefits like:
• Budget packs
• Regional packs

19. Ghadi Detergent: Ghadi Detergent (Rohit Surfactants) did to Nirma (Karsan Bhai Patel group)
what Nirma had done to wheel.
Ghadi did extensive soil testing and improved on its ability to work in hard water in UP region.
They targeted the mass and soon became famous. In turn Everyone else in the market had to
lower down prices to counter attack.

20. Chik Shampoo: Chik Shampoo ( Cavin Kare) used penetration pricing by changing the whole
game altogether by launching a completely new SKU ( sachets) into the Indian market.
Sachets were present before Chik came to market but they were not present for all FMCG
product. With Chik’s sachets. Cavin Kare group targeted the lower level of the pyramid
successfully. In response to the attack, the global giants like Unilever, Garnier, P&G etc. had to
come out with sachets which they were used to give free of cost as samples in rest of the world.

21. LG Television: LG entered the market when the Indian market was dominated by local players
like Videocon, Onida and BPL. For multinationals, only SONY had left a mark. LG used the mass
production method and thus reduced the price more and more and in turn attracted more and
more buyers.

22. Skimming Strategy
Price skimming involves setting a high price before other competitors come into the market. This is often used for
the launch of a new product which faces little or no competition – usually due to some technological features. Such
products are often bought by early adopters who are prepared to pay a higher price to have the latest or best
product in the market.

23. Apple uses skimming strategy for all its
products.

25. Sony earned huge revenues by using skimming pricing technique for their LCD and LED display panels. They
were priced at INR 21 lakhs almost a decade ago and now they are priced at 43 lakhs for a similarly sized
better featured model.

26. Freemium
Freemium is a pricing strategy by which a product or service (typically a digital offering or application such as software,
media, games or web services) is provided free of charge, but money (premium) is charged for proprietary features,
functionality, or virtual goods
Examples:
Range of premium options

27. Examples:
Free service(s):
• Users can create online presentations which are publicly
viewable on Prezi website
Premium service(s):
• Ability to make presentations private and edit them offline
Free service(s):
• Free assessment tools with accounts for teachers, school
administrators, students and student’s parents
Premium service(s):
• Premium plan for schools (100+ students) which also includes: Student
Performance, Custom Marking & Reporting, Extended Student Tracking,
Advanced Data Reporting

28. Examples:
Free service(s):
Free versions of the books downloaded from the web
Premium service(s):
• Physical books
Free service(s):
• Free web-based survey with 10 questions per survey
and 100 respondents per survey limits
Premium service(s):
• Premium monthly and yearly plans with additional features, such as:
• Unlimited questions, Unlimited responses, Custom design, Text analysis for
open responses, A/B testing, SPSS integration

29. Loss Leader
A business strategy in which a business offers a product or service at a price that is not profitable for the sake of
offering another product/service at a greater profit or to attract new customers.
Basically done to increase the customer base.
Examples:
Paytm

31. Flipkart Big Billion Day sale

32. Price discrimination is in general defined as offering the same quantity and quality of the product to different
customers at different prices.
Price Discrimination
Examples:

33. Coupons to selected consumers

34. Peak and Off-Peak Pricing

35. Premium pricing (also called image pricing or prestige pricing) is the practice of keeping
the price of a product or service artificially high in order to encourage favorable perceptions among
buyers, based solely on the price.
Examples:
Nike Studio Wrap – Premium Pricing
A footwear product targeted at women who favor studio
workouts like yoga and Pilates
Priced at $110 a pair.
Priced with a strategy to target up-market people
doing workouts like yoga and gain profit by value.
PREMIUM PRICING

36. Dove – High price to indicate premium quality
Company aims to be product quality leader in the market.
Priced higher than its competitors.

37. Tata Aria – Premium pricing(failure)
Tata Aria was launched with an expensive price tag of INR 12 -15.5 Lakh
Priced with an expectation to create a new market and a new image for TATA Motors.
It did not perform as expected
Company is planning to launch a Mini-Aria with a reduced price to take advantage of the mini-SUV / MPV
market.

38. TAG Heur – Premium pricing
Swiss watchmaker TAG Heuer raised average price of its watches from $250 to $1000
&
Sales volume increased sevenfold!

39. Premium Pricing – Chevy Cruze
The Cruze was launched at $16,995—well beyond what GM has ever charged for a compact and more
than the $15,655 Honda asks for its base Civic sedan!
Getting customers to pay more is central to GM's ability to become profitable over the long term.
GM had reason to believe its higher-price strategy for the Cruze will work based on its experience with the
Chevy Malibu sedan, whose 2007 redesign was well-received by critics and the public.

40. Psychological Pricing
Based on the theory that certain prices have a psychological impact.
Psychological Pricing Features:
• Used to play on consumer perceptions.
• Links with value pricing- high value goods priced according to what consumers THINK should be
the price.
• Classic example – Rs.999 instead of Rs.1000!
Examples:
Odd Pricing

41. BOGOF
Is abbreviated for “Buy One, Get One Free”, you have probably experienced this before. Again, it is
one of the most widely used pricing tactics in the world.

42. Comparative Pricing:
The pricing strategy that gives you a deal of two offers at the same time while they are similar but
the marketing strategist is deliberately making one offer more attractive – due to the effect of the
existence of the other offer.
Pricing plan of web hosting company

43. Product Bundle Pricing:
The marketing ploy that involves packaging several items together rather than one and giving
the consumers a discounted price – this way the seller earns more profits with more items
while the customer gets a nice deal.
Who doesn’t like a “discounted” Big Mac combo?

44. Perceived Value Pricing
• PVP is an open line pricing technique where respondents estimate the price of a new product
compared to those who are already in the market.
• This method can be used with concepts or real products. The technique is used with face to
face interviews. It is a preferred approach if the client has little idea about the price level of the
new product.
John Deere Tractor
Perceived value:
Durability
Reliability
Service
Longer warranty

46. Cost Based Pricing
Product Cost Price Value Customers
Cost Based Pricing Strategy are of 3 types:
1. Mark Up Pricing
2. Absorption cost
3. Target- Return Pricing

47. Mark Up Pricing
• The selling price is fixed by adding Mark-up or Margin to its cost.
• Usually used by:
Distributers, Marketing firms etc..
• Slower the turnaround of the product larger the margin and vice versa.
• Mark Ups are high on seasonal items, speciality items, demand inelastic items etc.
• Mark up price = unit cost /( 1- Desired return on sales )
How to calculate ?
• A FMCG company sells a bar of soap to retailer .
• Unit Cost= VC+FC
• VC per unit = Rs.10, Total FC= Rs. 300000
• Number of units produced= 50000
• Unit cost= 10+ (300000/50000)= Rs 16
• Now manufacturer wants to earn 20% mark up on sales
• Mark up price = unit cost/(1- desired return on sales)= 16/(1-0.2)=Rs20

48. Demand inelastic item

49. Cost= US$ 0.08
Price= US$1.08
Mark Up= 1,250%

50. Absorption Pricing
It is a method of setting pricing under which the price of a product includes all the variable cost associated with it and
the proportionate amount of fixed cost.
Mainly used by manufacturing firms.
It uses standard costing techniques.
It includes :
 Fixed cost
 Variable cost
Selling and administering cost
Advertisement cost
It is also known as full cost pricing.
+ PROFIT

51. Delhi - 5.04lakhs
Chennai - 5.44lakhs
Hydrabad - 5.40lakhs
Mumbai - 5.37lakhs
Bangalore - 5.59lakhs
Pune - 5.24lakhs

52. Target Return Pricing
• Similar to Absorption cost pricing.
• The difference is in fixing the profit margin.
• The profit margin/ mark up is fixed by considering the ROI.
• Firm will have return objectives, like 5% of invested capital, or 10% of sales revenue.
• Then you arrange your price structure so as to achieve these target rates of return.
• Market leaders or monopolists uses this pricing strategy.
How to calculate ?
• Investment of a pen manufacturer = Rs1million
• Total sales 50000
• Expected ROI= 20%, Unit cost of a pen =Rs 16
• Target return price= Unit Cost +( Desired return *
Invested capital)/ Unit sales
• TRP= 16+(0.2* 1000000)/50000 = Rs 20

53. Market Leaders ensuring target sales

54. ITC Cigarettes

55. PRICE-PRODUCT STRATEGY

56. 1.Premium Strategy (product Quality: high/price: high

57. 2 High Value Pricing Strategy (product Quality: high/price: medium)

58. 3. Super Value Pricing Strategy (product Quality: high/price: low)

59. 4.Overcharging Pricing Strategy (product Quality: medium/price: high)

60. 5.Medium Value Strategy (product Quality: medium/price: medium)

61. 6. Good Value Strategy (product Quality: medium/price: medium)

62. 7. Rip off strategy(product Quality: low/price: high)

63. 8.False Economy strategy(product Quality: low/price: medium)

64. 9. Economy strategy (product Quality: low/price: low)
Mc Swirls

65. THANK YOU