LEAD College of Management

1. MONEY
HONEY
PRICING STRATEGY
Aravind T S
LEAD College of Management

2. WHAT IS MEANT BY PRICE ?
 price is the quantity of payment or
compensation given by one party to another
in return for goods or services.

3. Revenue
generatin
g

4. PRICING
 The only part of marketing mix that is
revenue generating all the others are cost
 Pricing is the process of determining what a
company will receive in exchange for its
products .

5. SETTING THE PRICE
1. Selecting objective
2. Determining demand
3. Estimating costs
4. Analyzing competitors cost,price and offers
5. Selecting a pricing method
6. Selecting final price

6. STEP.1 – SELECTING PRICING OBJECTIVE
 Survival :-Short term pricing objective are set in order to survive
 Profit :- The objective is to maximise profit
 Return on investment :-Price are set to attain a specified return on the
companies investment
 Maximum market share :- Higher sales volume will lead to lower unit
costs and higher long-run profit. They set the lowest price (IKEA)
 Maximum market skimming :- companies unveiling a new technology
favour setting high price to maximise market skimming .price starts high
and slowly rollback
 Product quality leadership :- Starbucks , CCD, BMW , Mercedes,Taj
have positioned as leaders in quality , with premium pricing and very
loyal customer base

7. STEP.2 - DETERMINING DEMAND
 Each price will lead to a different impact on a
company’s marketing objective
Inelastic Demand:-the situation in which the
supply and demand for a good are
unaffected when the price of that good or
service changes.
Inelastic Demand : demand for
a product is sensitive to price
changes

8. ESTIMATING COST
 Fixed cost : salaries, rent ,intrest
 Variable cost : vary directly with the level of
production.
 Total cost : Fixed + Variable cost
 Average cost : Cost per unit .

9. ANALYZING COMPETITORS COST,PRICE AND
OFFERS
 The firm must take competitors cost , price
, and possible price reactions .

10. FIXING THE PRICING
 The price of the product should be
determined in such a way as to give a fair
return to the producer, a good margin to the
middlemen and a reasonable price to the
consumer .

11. PREMIUM PRICING
 Use a high price where there is a
unique brand.
 This approach is used where a substantial
competitive advantage exists and the
marketer is safe in the knowledge that they
can charge a relatively higher price

12. SKIMMING
 A very high price is fixed by a company for a
new product
 Earn max profit at earliest
 Deliberate to built up the image of quality and
prestige of the product .
 Only for specialty goods
 No competition , if yes then showing
competitive advtage

13. BAIT
 Two products are manufactured by a
firm, and the price of one product is kept low
and the price of the other product is kept high
.
 Selling high price product by showing the low
price
 Eg : Car, Fast food , Computers

14. PSYCHOLOGICAL PRICING.
 This approach is used when the marketer
wants the consumer to respond on an
emotional, rather than rational basis.
 For example Price Point Perspective (PPP)
0.99 Paise not 1 rupee.
 Eg:- Bata

15. PRODUCT LINE PRICING.
 Different products of different prices are
manufactured , but the price of all the
product are determined in a line
Say as :- 25,35, 40 etc

16. OPTIONAL PRODUCT PRICING
 Companies will attempt to increase the
amount customers spend once they start to
buy.
 For example airlines will charge for optional
extras such as guaranteeing a window seat
or reserving a row of seats next to each
other.

17. PROMOTIONAL PRICING.
 Pricing to promote a product is a very
common application. There are many
examples of promotional pricing including
approaches such as BOGOF (Buy One Get
One Free), money off vouchers and discount

18. PRODUCT BUNDLE PRICING.
 Here sellers combine several products in the
same package.
 his also serves to move old stock. Blu-ray
and videogames are often sold using the
bundle approach once they reach the end of
their product life cycle.

19. GEOGRAPHICAL PRICING.
 Geographical pricing sees variations in price
in different parts of the world.
 shipping costs increase price
 n some countries there is more tax on certain
types of product which makes them more or
less expensive

20. VALUE PRICING
 This approach is used where external factors
such as recession or increased competition
force companies to provide value products
and services to retain sales
 e.g. value meals at McDonalds and other
fast-food restaurants.
 http://www.youtube.com/watch?v=LX7gfhv2o
5U

21. PENETRATION PRICING
 The price charged for products and services
is set artificially low in order to gain market
share.
 http://www.youtube.com/watch?v=EPYOlJ9t
BHM

22. ECONOMIC PRICING
 This is a no frills low price. The costs of marketing and promoting a
product are kept to a minimum.
 Budget airlines are famous for keeping their overheads as low as possible and
then giving the consumer a relatively lower price to fill an aircraft. The first few
seats are sold at a very cheap price (almost a promotional price) and the middle
majority are economy seats, with the highest price being paid for the last few
seats on a flight (which would be a premium pricing strategy).
 http://www.youtube.com/watch?v=jmNrvlQ73pU

23. CHANGING PRICING ENVIRONMENT
Buyers can :
 Get instant price comparison from
thousand of vendors (Eg:
mysimon.com, flipcart,pricescan.com)
 Name there price and have it met
(priceline.com)
 Get products free : Free software movement
that started

24. FREEMIUM STRATEGY
 My space
 Skype
 Adobe gave away PDF reader for free in
1994

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