Price is determined by several factors including costs, customer perceived value, and competition. There are three main approaches to pricing: cost-based pricing which adds a markup to costs, value-based pricing based on customer perceptions, and competition-based pricing which matches competitors' prices. Other pricing strategies include penetration pricing to gain market share, market skimming to extract profits from early adopters, loss leader pricing to attract customers, and psychological pricing to influence perceptions. Product line, bundle, and segmented pricing are also used to target different customer groups.

1. By:-
Mithilesh Trivedi

2. •Price is the amount of money charged for a good or
service
•The only marketing mix element that produces
revenue
•The sum of all the values that consumers exchange
for the benefits of having or using the product or
service

4. General Pricing Approaches
1. Cost-Based Pricing
2. Value-Based Pricing
3. Competition-Based Pricing

5. Cost-Based Pricing
 Adding a standard markup to the cost of
the product
Product Cost Price Value Customers

6. Value-Based Pricing
Setting price based on buyer’s perceptions of
value rather than on the seller’s cost
Product Value Price Cost Customers

7. Competition-Based Pricing
 Setting prices based on the prices that competitors
charge for similar product

8. Pricing
Strategies

9. Penetration
Pricing
Price set to ‘penetrate the market’
‘Low’ price to secure high volumes
Typical in mass market products –
chocolate bars, food stuffs, household
goods, etc.
Suitable for products with long anticipated
life cycles
May be useful if launching into a new
market

10. Market Skimming
Pricing
• High price, Low volumes
• Skim the profit from the market
• Suitable for products that have short life
cycles or which will face competition at
some point in the future (e.g. after a
patent runs out)
• Examples include: PlayStation, jewellery,
digital technology, new DVDs, etc.

11. Loss Leader
Pricing
• Goods/services deliberately sold below cost to
encourage sales elsewhere
• Typical in supermarkets, e.g. at Christmas, selling
bottles of gin at £3 in the hope that people will be
attracted to the store and buy other things
• Purchases of other items more than covers ‘loss’
on item sold
• e.g. ‘Free’ mobile phone when taking on contract
package

12. Psychological
Pricing
• Used to play on consumer perceptions
• Classic example - $9.99 instead of $10.00!
• Odd-even: $5.95, $.79, $699 OR $12, $50
• Multiple Unit-3 for !1.00 better than $.34
each

13. Going Rate (Price
Leadership)
• In case of price leader, rivals have difficulty in
competing on price
• May follow pricing leads of rivals especially
where those rivals have a clear dominance of
market share
• Where competition is limited, ‘going rate’
pricing may be applicable – banks, petrol,
supermarkets, electrical goods – find very
similar prices in all outlets

14. Price Discrimination
• Charging a different price for the same
good/service in different markets
• Requires each market to be impenetrable
• Requires different price elasticity of
demand in each market
• Air/rail
• First class
• Business class
• Economy class

15. Product Line Pricing
Optional- Product Pricing
Captive- Product Pricing
By-Product Pricing
Product Bundle Pricing
Product Mix Pricing Strategies

16. Product Line Pricing
 Setting the price steps between various product line based on cost difference
between the products, customers evaluations of different features and
competitors’ prices
Optional- Product Pricing
 The pricing of optional or accessory products along with a main product
Captive- Product Pricing
 Setting a price for products that must be used along with a main product, such
as blades for a razor and film for a camera

17. By-Product Pricing
 Setting a price for by-product in order to make the main product’s
price more competitive
Product Bundle Pricing
 Combining several products and offering the bundle at a reduced
price

18. Strategy Description
Discount and Allowance
Pricing
Reducing prices to reward customer responses such as paying
early or promoting the product
Segmented Pricing Adjusting prices to allow for differences in customers,
products, or locations
Psychological Pricing Adjusting prices for Psychological effect
Promotional Pricing Temporarily reducing prices to increase short-run sales
Geographical Pricing Adjusting prices to account for the geographic location of
customers
International Pricing Adjusting prices for international markets
Price Adjustment Strategies

19. Price Changes
•Price cuts
•Price increases
Initiating Pricing Changes
Price increases
• Product is “hot”
• Company greed
Price cuts
• New models will be
available
• Models are not selling well
• Quality issues

20. Price cuts occur due to:
•Excess capacity
•Increased market share
Price increase from:
•Cost inflation
•Increased demand
•Lack of supply
Price Changes

21. Public Policy andPricing
Price fixing: Sellers must set prices without
talking to competitors
Predatory pricing: Selling below cost with the
intention of punishing a competitor or gaining
higher long-term profits by putting competitors
out of business

22. Pricing Across Channel Levels
Retail (resale) price maintenance is when a manufacturer requires a
dealer to charge a specific retail price for its products
Deceptive pricing occurs when a seller states prices or price savings
that mislead consumers or are not actually available to consumers
• Scanner fraud failure of the seller to enter current or sale prices
into the computer system
• Price confusion results when firms employ pricing methods that
make it difficult for consumers to understand what price they are
really paying