Module 7- Pricing

8/6/2019 Module 7- Pricing

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MODULE

7- PRICING

ITM- MBA I SEM


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CONSUMER PERCEPTION OF PRICES

SETTING THE PRICE- 6 STEP PROCESS

ADAPTING PRICES


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Price is one element of the marketing mix thatproduces revenue. It also communicates to themarket the companys intended positioning of

its brand. Purchase decisions are based on how

consumers perceive, interpret and process theprices based on their knowledge.

Marketers try to understand this through:- Reference Prices

Price-Quality Inferences

Price Cues


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There is a six-step procedure, a firm has to

follow in setting its pricing policy-

A. Selecting the Pricing Objective: First of all,

the company has to decide where does it want

to position its offering. A firm can pursue any

of its objectives which can be Survival,

Market Penetration Pricing, Market Skimming

etc..B. Determining Demand: Generally, the

relationship between the price and demand is

inverse.


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The higher the price, the lower the demand.

In determining demand, marketers must

understand-

Price Sensitivity

Estimating demand curves: It involves

statistically analyzing past prices,

quantities sold, conduct surveys etc.. Price Elasticity of Demand


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C. Estimating Costs: Company wants to charge

a price that covers its production and

distribution costs. It considers factors like-Accumulated Production Experience(Learning Curve),

Target Costing etc..

D. Analyzing Competitors: The firm must take

the competitors costs, prices and offers intoaccount before setting its own prices.


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E. Selecting a Pricing Method: After consideringthe three Cs- customers demand, cost functionand competitors prices, firm can now set up the

prices. There are some popular price settingmethods-

Mark up Pricing

Target return Pricing(Price yields target return ofROI)

Perceived Value and Value Pricing Going rate Pricing

Auction-type Pricing

Group Pricing


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F. Setting the Final Price: In selecting that

price, company must consider factors like-

Company Pricing Policies: Prices must beconsistent with company policies and at the

same time , companies are not averse to

price penalties under certain situations.

Impact of Price on other parties likedistributors, dealers, sales force,

competitors etc..


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Several Price adaptation Strategies are:

Geographical Pricing

Price Discounts and AllowancesPromotional Pricing-Special event pricing,

Low interest financing, longer payment

terms, warranties, psychological discounting.

Discriminatory Pricing-Customer segmentPricing, Location pricing, time pricing,

channel pricing etc..

Product Mix Pricing


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Initiating Price Cuts: Companies often need

to cut prices because of various reasons but

they should take care not to be trapped in low

quality perception or price wars.

Initiating Price Increases: A major

circumstance provoking price increases is cost

inflation, anticipatory pricing or over demand.


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THANK YOU

Documents

Module 7- Pricing