Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Pricing Decisions & Strategies


Published on

Published in: Business, Economy & Finance
  • Be the first to comment

Pricing Decisions & Strategies

  1. 1. <ul><li>Pricing Decisions & Strategies </li></ul>
  2. 2. <ul><li>Marketing Mix : 4 P’s </li></ul><ul><li>Product </li></ul><ul><li>PRICE </li></ul><ul><li>Place </li></ul><ul><li>Promotion </li></ul><ul><li>Pricing is a very important strategic issue, as it is directly related to product positioning. </li></ul><ul><li>Pricing affects other marketing mix elements such as product features, Channel decisions and promotion. </li></ul>
  3. 3. Steps to Price a Product (Not always same) <ul><li>Develop Marketing Strategy </li></ul><ul><li>Market Analysis, Segmentation, Targeting and Positioning </li></ul><ul><li>Marketing Mix Decision </li></ul><ul><li>Define the Product, Distribution and Promotional strategies </li></ul><ul><li>Manage Demand curve </li></ul><ul><li>Demand Price relation </li></ul>
  4. 4. <ul><li>Cost </li></ul><ul><li>All fixed and variable cost is calculated </li></ul><ul><li>Environmental Factors </li></ul><ul><li>PEST </li></ul><ul><li>Set Pricing Objective </li></ul><ul><li>Profit maximization, Revenue maximization, Price stabilization </li></ul><ul><li>Determination of Price </li></ul><ul><li>Use one or combination of the above factors and make a pricing structure, give discounts etc. </li></ul>
  5. 5. Pricing Objectives <ul><li>Current Profit Maximization </li></ul><ul><li>This stresses on Current profits, taking into account revenue and costs </li></ul><ul><li>Current Revenue Maximization </li></ul><ul><li>Stresses on increasing the Current revenue, and not profits. The motive is to maximize market share and gain profits in long term. </li></ul>
  6. 6. <ul><li>Maximize Quantity </li></ul><ul><li>This stresses to maximize the number units sold to decrease long-term costs as the experience curve predicts </li></ul><ul><li>Maximize Profit Margin </li></ul><ul><li>Stresses to increase the profit margin per unit, as, number of unit being sold may be low. </li></ul><ul><li>Quality Leadership </li></ul><ul><li>Use price to signal high quality, to position the product as quality leaders. </li></ul>
  7. 7. <ul><li>Partial Cost Recovery </li></ul><ul><li>Organization which has other revenue sources may seek partial cost recovery. </li></ul><ul><li>Survival </li></ul><ul><li>Incase of market decline or overcapacity, the emphasis may be on to the survival in the market only and to cover the costs. </li></ul><ul><li>Status Quo </li></ul><ul><li>Price Stabilization to avoid price wars and maintain stable level of profits </li></ul>
  8. 8. Skim Pricing <ul><li>Skimming is the strategy used to pursue the objective of Profit Margin Maximization. </li></ul>
  9. 9. Skimming is most Appropriate .. <ul><li>Demand is expected to be relatively inelastic, ie. The customers targeted are not highly price sensitive </li></ul><ul><li>Large cost savings are not expected at high volumes or it is difficult to predict the cost savings that can be achieved at high volumes </li></ul><ul><li>The company does not have the resources to finance the last capital expenditure for high volume production with initial low profit margins. </li></ul>
  10. 10. Penetration Pricing, most appropriate … <ul><li>Objective is to maximize the quantity by lowering the prices. </li></ul><ul><li>Demand highly elastic, ie. Customers are price sensitive, the demand increases as the price decreases. </li></ul><ul><li>Economies of scale </li></ul><ul><li>The product should be of mass appeal. </li></ul><ul><li>Major threat by competition. </li></ul>
  11. 11. Pricing Methods <ul><li>Cost Plus Pricing </li></ul><ul><li>Set the price at the production cost adding a certain profit margin. </li></ul><ul><li>Target Return Pricing </li></ul><ul><li>Set the price to achieve a target return on investment. </li></ul><ul><li>Value Based Pricing </li></ul><ul><li>Base the price on the effective value to the customers which is relative to the alternative product. </li></ul><ul><li>Psychological Pricing </li></ul><ul><li>Base the price on psychological factors of the consumer. </li></ul>
  12. 12. Price Discounts <ul><li>Quantity Discounts </li></ul><ul><li>Offer to customers who purchase is large quantities. </li></ul><ul><li>Cumulative Quantity Discount </li></ul><ul><li>A discount that increase as the cumulative quantity increases. </li></ul><ul><li>Seasonal Discount </li></ul><ul><li>Based on the time when the purchase is made. </li></ul>
  13. 13. <ul><li>Cash Discount </li></ul><ul><li>Extended to customer who pay there bill before a specified date. </li></ul><ul><li>Trade Discount </li></ul><ul><li>A functional discount offered to channel members for performing there roles. </li></ul><ul><li>Promotional Discount </li></ul><ul><li>A short term discounted price, offered to stimulate sales. </li></ul>
  14. 14. <ul><li>Thank You </li></ul>