SETTING THE PRICE

Variations of brands for different price points

MARIOTT HOTELS

Steps in Setting a Pricing Policy

Step 1:Selecting The Pricing Objective

SurvivalMaximum Current

ProfitMaximum Market

ShareMaximum Market

Skimming

Product Quality Leadership

Step 2:Determining Demand

Price SensitivityPrice Elasticity

Estimating Demand CurvesSurveys

Price ExperimentsStatistical Analysis

Step 3:

Accumulated Production -decline with the average cost

Target Costing -concentrated effort by engineers & designers to achieve a particular reduced cost

Step 4:Analyzing Competitor’s Costs, Prices,& Offers

Anticipating Competitor’s reactions -Assuming standard way to a price change -Considering each change a fresh-new challenge

Step 5:Selecting a Pricing method

Markup pricingTarget-return pricingPerceived Value Pricing

Value Pricing

Winning Customers by charging a

fairly low price for a high-quality

offering

Going-rate Pricing

Auction-type Pricing English auctions (ascending bids) Dutch auctions(descending bids) Sealed-bid auctions

Step 6:Selecting The Final Price

Gain & Risk Sharing pricingImpact of Price on other parties

Created by Subhasis Panda, IIT Bombay, during an internship by Prof.Sameer Mathur, IIM Lucknowwww.IIMInternship.com