PRICING STRATEGIES 1

Ø  PRICING STRATEGIES 1

Ø  MARKETING MGMT/MANAGERIAL ECONOMICS

Ø  MEANING AND SIGNIFICANCE

• PRICING CAN BE DEFINED AS THE PROCESS OF DETERMINING WHAT A COMPANY WILL RECEIVE FROM ITS CUSTOMERS IN EXCHANGE FOR THE PRODUCT OR SERVICE IT SELLS.
• IMPORTANT PART OF A COMPANY MARKETING MIX STRATEGIES. IT CAN HELP OR HINDER A COMPANY PRODUCT OR SERVICES SALE/
• HIGHLY RISKY DECISION AREA

Ø  FACTORS INFLUENCING PRICING DECISIONS

1. INTERNAL
2. MARKETING OBJECTIVES
3. MARKETING MIX STRATEGY
4. COSTS
5. ORGANIZATIONAL CONSIDERATIONS
6. EXTERNAL
7. MARKET AND DEMAND
8. COMPETITION
9. OTHER ENVIRONMENTAL FACTORS
10. THE 5C’S FRAMEWORK FOR PRICING DECISIONS

Ø  PRICING STRATEGIES

Ø  COST BASED PRICING

1. MARK UP PRICING- FIXING A PRICE FOR PRODUCT BY ADDING ( MARKING UP) A MARGIN TO THE COST PRICE

SALE PRICE =COST*MARK UP+COST

2. FULL COST PRICING METHOD TAKES INTO CONSIDERATION THE TOTAL COST AND TARGET RATE OF PROFIT

Ø  MARKET BASED PRICING

Ø  WHAT THE MARKET CAN BEAR

1. SKIMMING:-SKIM THE MARKET INITIALLY WITH A HIGH PRICE AND HIGH PROFITS
2. PENETRATION:- GREATER MARKET PENETRATION THROUGH RELATIVELY LOW PRICE NON LUXURY

Ø  PRICE ELASTICITY

Ø  PRICING STRATEGIES

1. COMPETITION ORIENTED PRICING
2. PREMIUM PRICING:- INVOLVE PRICING ABOVE THE COMPETITOR’S PRICE
3. DISCOUNT PRICING
4. PARITY PRICING ALSO CALLED GOING RATE PRICING MATCHING THE PRICE OF COMPETITORS

Ø  VALUE PRICING

Ø  VALUE PERCEIVED BY THE CUSTOMERS

Ø  PRODUCT LINE PRICING

Ø  ALSO KNOWN AS PRODUCT LINE PROMOTION METHOD OR PRICING

Ø  PRICES OF DIFFERENT PRODUCT CAN BE FIXED IN SUCH A WAY THAT PRODUCT LINE AS A WHOLE IS PRICED OPTIMALLY.

Ø  OTHER

1. TENDER PRICING
2. AFFORDABILITY PRICING
3. DIFFERENTIATED PRICING

Ø  STEPS IN PRICING PROCEDURE

1. SELECTING THE PRICING OBJECTIVE
2. DETERMINING DEMAND
3. ESTIMATING COSTS
4. ANALYZING COMPETITORS’S COST,PRICE AND OFFERS
5. SELECTING THE PRICE METHODS
6. PERIODIC REVIEW METHODS

Ø  SELECTING THE PRICE OBJECTIVE

1. PROFIT MAXIMIZATION
2. RETURN ON INVESTMENT
3. ENTRY INTO NEW MARKET
4. SURVIVAL
5. CHECKING COMPETITORS ENTRY

Ø  SPECIAL PRICING STRATEGIES

1. NEW PRODUCT PRICING
2. SKIMMING  PRICING
3. PENETRATION PRICING
4. PRICE BUNDLING
5. PURE BUNDLING
6. MIXED BUNDLING
7. TYING
8. CAPTIVE –PRODUCT PRICING( RAZOR AND BAIT PRICING):- BASIC PRODUCT AT LOW PRICE BUT SPARES AT HIGH RATE