PRICING

Presented byDipika Paneru

Garima DawadiHimalaya Ban

A case of

• Tata CDMA formed alliance with NTT DOCOMO 2008

It Offered• Pay per-second basis• A per character charge for SMS• Unlimited GPRS @ Rs. 95• Change Plan Daily• Crossed 1 million fan on 2011• Celebrated by doubling their talk time offer

Pricing

• One of the element of the marketing mix that produces revenue; the others produce costs.

• South Asian consumers are extremely price and value sensitive

• They seek more benefits for same price

Consumer Psychology and Pricing

Reference Prices

Price-quality inferences

Price endings

Steps in Setting Price

Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

Step 1: Selecting the Pricing Objective

• Survival

• Maximum current profit

• Maximum market share

• Maximum market

skimming Eg. Iphone

• Product-quality leadership

Eg. Rollys Royce

Step 2: Determining Demand

Price Sensitivity

Estimating

Demand Curves

Price Elasticity

of Demand

Inelastic and Elastic Demand

Step 3: Estimating Costs

• Types of costs and levels of production

• Accumulated production

• Target costing

Cost per Unit as a Function of Accumulated Production

Step 4: Analyzing Competitors

• Costs

• Prices

• Offers

Step 5: Selecting a Pricing Method

• Markup pricing

• Target-return pricing

• Perceived-value pricing

• Value pricing

• Going-rate pricing

• Auction-type pricing

Break-Even Chart

Step 6: Selecting the Final Price

• Impact of other marketing activities

• Company pricing policies

• Gain-and–risk sharing pricing

• Impact of price on other parties

Adapting the Price

Geographical Pricing

Discounts/Allowances

Differentiated Pricing

Promotional Pricing

Geographical Pricing

• Free on board price

• Zone Delivered Price

• Basing Point Price

• Uniform Delivered Price

• Freight Absorption Price

Discounts and Allowances

• Discount

• Quantity Discount

• Functional Discount

• Seasonal Discount

• Allowance

Promotional Pricing Tactics

• Loss-leader pricing

• Special-event pricing

• Cash rebates

• Low-interest financing

• Longer payment terms

• Warranties and service

contracts

• Psychological discounting

Differentiated Pricing

• First Degree Pricing

• Second Degree Pricing

• Third Degree Pricing

Initiating to Price Changes

Initiating Price Cuts

• Low-quality trap

• Fragile-market-share trap

• Shallow-pocket trap

• Price-war trap

Initiating Price Increases

• Delayed quotation pricing

• Escalator clauses

• Unbundling

• Reduction of discounts

Responding to Competitors’ Price Changes

• Homogeneous Product

• Non-Homogeneous Product