1. Pricing Strategies in Business Marketing By Prof. Raghavendran.V

2. What is Meaning of the Price? 2 Prof. Raghavendran.V

3. Price is the overall perception of value or the benefits that will vary in degrees of importance to the different individuals within the buying committee (buying Centre) of the buying firm. However there is no agreed formula on the importance to be given to various benefits( or attributes), different individuals in the buying centre will have different perception. Prof. Raghavendran.V 3

4. A business marketing firm has to consider many factors in its pricing decisions and they are: Pricing objectives Demand analysis Cost analysis Competitive analysis Government regulations Prof. Raghavendran.V 4 Factors influencing Pricing decision

5. It is derived from the corporate and marketing objectives. Survival Maximum short term profits Maximum short term sales Maximum marketing skimming Product-quality leadership Other pricing objectives Prof. Raghavendran.V 5 Pricing Objectives

6. Conditions determining price elasticity of demand: the demand is likely to be less elastic ( or inelastic) under the following conditions. There are few competitors No availability of substitutes The high prices Prof. Raghavendran.V 6 Demand Analysis

7. Categorized in two benefits and they are: Hard benefits, refers to physical attribute of the product such as production rate of a machine, rejection of a component, and price/performance ratio. Soft benefits includes company reputation, customer service, warranty period, customer training and more difficult to assess. Prof. Raghavendran.V 7 Cost-Benefit Analysis

8. Company costs set the lowest point on the price range. Hence forth pricing strategy or decisions must consider the cost involved. The industrial marketer must identify and classify costs. And they are classified as Fixed costs, Variable costs, Total Costs, Semi variable costs, Direct costs, Indirect Costs and allocated costs The industrial marketer must understand and they are….. Prof. Raghavendran.V 8 Cost Analysis

9. Production costs Accumulated experience helps in reduction of costs The effect of break-even analysis on costs & sales volume Prof. Raghavendran.V 9 Cost Analysis

10. Fixed, Variable, Semi Variable, Indirect and Direct costs Prof. Raghavendran.V 10 Production Costs TFC Costs AFC Production Total Fixed Costs & Average Fixed Costs

11. Prof. Raghavendran.V 11 Total Variable Cost TC TVC FC TFC Total Cost

12. Prof. Raghavendran.V 12 Production Costs FIXED COSTS VARIABLE COSTS

13. Is also called as learning curve or Experience Curve. This concept costs ( particularly variable costs) decline as cumulative volume of production increases. In other words, the average unit total cost of a product declines over a period with accumulated experience of production and sales. Prof. Raghavendran.V 13 Accumulated Experience Avg Cost Per Unit Accumulated Production

14. It is technique which is used by the marketer to consider different prices and their possible effects on sales volumes and profits. Prof. Raghavendran.V 14 Break Even Analysis @ 25 Sales Revenue @ 30 @ 20 Total Cost FIXED COST

15. Competitive-level pricing as most important pricing strategy. An industrial Firm should get the information on not only competitor’s level prices and costs but also competitors product quality, technical expertise and delivery performance. Prof. Raghavendran.V 15 Competitor Analysis

16. BM should be aware of the effect of government regulations on pricing decisions. Though we free market economy, there are some necessary restrictions that must be placed on business to ensure fair play and to protect consumers and smaller companies. Price discrimination Predatory Pricing Prof. Raghavendran.V 16 Government Regulations:

18. Value Based Pricing

19. Customer Determined Pricing

20. Competition Based PricingProf. Raghavendran.V 17 Pricing Methods

21. Competitive Bidding & negotiation Pricing New products Pricing across the product-life cycle Competitive Bidding & negotiation: Strategy for competitive bidding, this is known as probabilistic bidding, this strategy make 2 assumptions and the pricing objective is profit maximization and buying organization will decide the order on the lowest bidder. Prof. Raghavendran.V 18 Pricing Strategies

22. Three variables are used in this technique: Amount or price of the bid Expected profit, if the bid price is accepted and The probability of acceptance of this bid price. E(A)= P(A) * T(A) A= bid in Rs E(A)=Expected profit at bid price A P(A)=Probability of acceptance of the bid price A T(A)= Profit, if the bid price A is accepted Prof. Raghavendran.V 19

23. Pricing New Products: Skimming (High Initial Price) Low Penetration ( Low Initial Price) Pricing Across Product Life-Cycle Growth stage Pricing Strategy Maturity Stage Decline Stage Prof. Raghavendran.V 20

24. Key Terms Associated with pricing Discounts List Price Trade Discounts Quantity Discounts Cash Discounts Geographical pricing Ex-factory FOR & FOB destination Taxes and Levies Prof. Raghavendran.V 21 Pricing Policies

26. Financial Lease

27. Sale and lease back transaction

28. Leveraged leaseProf. Raghavendran.V 22 Leasing

29. What are the important factors which affect industrial pricing? A power transformer manufacturing company wants to quote in response to a closed tender notice from a state electricity board, valued at Rs 80 Crores. If you were working in the company’s sales office and your senior asks you to recommend a strategy to win the contract and also make a profit, what will be your response? ( make suitable assumptions) Why leasing is gaining importance in business marketing for capital goods? Prof. Raghavendran.V 23 Assignment time: Submit by 26-9-11