7/31/2019 Pricing Methods n Strategies

1/23

PRICINGMETHODSAND

STRATEGIES

7/31/2019 Pricing Methods n Strategies

2/23

CONTENTS PricingMethods

Pricingstrategies

Implementation

Conclusion

7/31/2019 Pricing Methods n Strategies

3/23

A Framework for Developing andApplying a Pricing Strategy

Objectives

Pricing methods

Pricing Strategy

Implementation of Pricing Strategy

Price Adjustments

7/31/2019 Pricing Methods n Strategies

4/23

METHODSINPRICING

Cost-basedpricing

Demand-basedpricing Competition-basedpricing

Value-basedpricing

7/31/2019 Pricing Methods n Strategies

5/23

Cost-basedPricing Settingofpricebasedontotalcostperunit

Methods:-

ostpluspricing

argetpricing

arginalcostpricing

reak-evenpricing

+Profit goals

(Merchandise,service, and

overhead

costs)

R

O

I

7/31/2019 Pricing Methods n Strategies

6/23

computedbyaddingacertain

percentageofprofittocostoftheproductperunit.

Costisaddedwithpredeterminedtarget

rateofreturnoncapital

Priceisdeterminedonthebasesof

variablecost

Usesbreakevenanalysisby

determiningnumberofunitsoldtogenerate

revenuetocovertotalcost

7/31/2019 Pricing Methods n Strategies

7/23

Demandbasedpricing Demandisbasicfactor

Consumerresponsestovariouspricepoints

analyzedtoarriveathighestacceptableprice

Methods

ifferentialpricing

remiumpricing

eutralpricing

7/31/2019 Pricing Methods n Strategies

8/23

Sameproductissoldatdifferentpricestodifferentcustomerindifferentplacesatdifferentprices

productorbrandshouldbepositionedatthetopofthemarketandmustoffergreatervalueonqualitativetermsthansimilar

brand

offeringextravalueorbenefitswithbrandcostorpriceremainingcompetitive

7/31/2019 Pricing Methods n Strategies

9/23

Competitionbasedpricing

Fixingpricesmainlyonthebasisofpricesfixedby

competitors

Productpricesarefixednotoncostordemandbut

onbasisofcompetitorsprice

Methods

oingratepricing onventionalpricing

ealbidpricing

7/31/2019 Pricing Methods n Strategies

10/23

chargingpriceaccordingtowhat

competitorsarecharging

Pricegetfixedbecausethey

haveprevailedoveralongperiodoftime

Priceisfivedbasedonhowthe

competitorpricetheirproduct

7/31/2019 Pricing Methods n Strategies

11/23

ValueBasedPricing

Priceisbasedonvaluetocustomers

Examplesincludestatusproducts/exclusiveproducts

Methods

erceived-valuepricing

alueformoneypricing

The Ferrari FXX with a price tag of$1.7million was so exclusive thatyou had to be invited to buy one.

7/31/2019 Pricing Methods n Strategies

12/23

Concernwithsettingthepriceonthe

basisofvalueperceivedbythebuyerof

theproductratherthansellercost

Priceisbasedonthevaluewhich

thecustomergetsfromproducttheybuy.

7/31/2019 Pricing Methods n Strategies

13/23

7/31/2019 Pricing Methods n Strategies

14/23

Pricing Strategies

Developing a pricing strategyis a continuous marketing processand is undertaken when:

A new product is introduced. An existing product is revised.

The competitive environment changes.

A product moves through its life cycle. A competitor initiates a price change.

Costs rise or fall dramatically.

The firms prices come under government

scrutiny.

7/31/2019 Pricing Methods n Strategies

15/23

Stepsinpricingstrategies

Selectingtargetmarkets

Studyingconsumerbehavior Identifyingcompetition

Assigningpricearoleinmarketingmix

Relatingcostanddemand

Determiningstrategicprices

7/31/2019 Pricing Methods n Strategies

16/23

7/31/2019 Pricing Methods n Strategies

17/23

PricingstrategiesMarket-SkimmingPricing:Settingahighinitialpriceforanewproduct.

Worksifproductisnew,distinctiveanddesired EarlyinProductLifeCycle,whendemandinelastic

Toattracttheconsumersofhighincomegroup

Market-PenetrationPricing:Settingalowinitialpriceforanewproduct.

Worksiflargemarket,elasticdemand

Economiesoflargescaleproductionarepossible

Todiscouragenewcompetition

7/31/2019 Pricing Methods n Strategies

18/23

SkimmingVsPenetration

Sufficientbuyersneeded

withinelasticdemand

Economiesofscalenot

importanttocosts

Barrierstoentry(patent)

ShortPLC

Shorttermprofit

maximization

Buyersneedwithelasticdemand

Economiesofscalehelpreducecosts,profits

Discouragecompetitionwithlowcost,smallmargins

ExpectedlongPLC

Increasingmarketshareandsalesvolume

7/31/2019 Pricing Methods n Strategies

19/23

Implementing Pricing Strategies

Price quality associationOdd pricing

One price/Flexible pricing

Customary/Variable pricing

7/31/2019 Pricing Methods n Strategies

20/23

Implementation

Price lining

prestige pricingLeader pricing

Price bundling

Geographic pricing

7/31/2019 Pricing Methods n Strategies

21/23

Conclusion

It analyzes sales-based, profit-based,pricing methods, and describes the role ofa broad price policy.

It examines and applies the approaches toa pricing strategy.

It discusses several specific decisions thatmust be made in implementing a pricingstrategy.

an overall frame work of how price can be

adjusted to meet the needs of the market

7/31/2019 Pricing Methods n Strategies

22/23

7/31/2019 Pricing Methods n Strategies

23/23