Factors affecting pricing decision AND Strategies followed by companies in reality

1. Prof
Shivananda
R
Koteshwar
Director,
The
Amaatra
Academy
shivoo@pes.edu
/
Facebook:
shivoo.koteshwar
You don’t sell through price. You sell the price.
For Mount Carmel College
BBM Students, Sept 2013

2.  Factors
affecting
pricing
decision
 Strategies
followed
by
companies
in
reality

3.  Consider
the
psychology
of
prices
and
not
simply
the
economics
 Consumer
perception
of
value
is
important
 Customers
use
price
less
when
they
can
judge
quality
of
a
product.
 Price
becomes
an
important
quality
signal
when
customers
can’t
judge
quality;
price
is
used
to
say
something
about
a
product.
 Price
often
depends
on
circumstances
–
You
always
pay
more
to
fly
when
you
want
to
fly
 Consumers
are
often
prepared
to
pay
more
if
they
expect
to
get
excellent
service
 Adding
value
doesn’t
mean
dropping
price
 Price
will
be
compared
-­‐
Other
price
offers,
Prices
previously
paid,
Going
rate,
Alternative
product
price,
Alternative
substitute
price

4. Cost-plus
pricing
Price based on
both demand
and costs
Price set in
relation to
market alone
SELECT BASE PRICE DETECTION METHOD
SELECT PRICING OBJECTIVE
Profit Oriented
Target return /
Maximize Profit
Sales Oriented
Sales Volume /
Market Share
Status Quo
Stabilize Price /
Competition
DESIGN APPROPRIATE STRATEGIES
• Price vs. nonprice
competition
• Skimming vs.
penetration
• Discounts and
allowances
• Freight payments
• One price vs.
flexible price
• Psychological
pricing
• Leader pricing
• Everyday low vs.
high-low pricing
• Resale price
maintenance

5. Internal reasons – Marketing objective (survival, market share,
profit maximization, quality leadership), cost, etc
External reasons - Nature of the market, demand, Competition,
Environmental factors (economy, resellers, government)

6. Loss leader

7. Location Packaging Advertising Branding Service
Sponsorship - £25m-a-year
Tata, reliance, airtel, SBI, Infosys
Amazon
Google
Apple
UPS
Sony
5c 5s
Vertical product
variation
Product
Modifications
Product mix

8. Captive
Optional (Accessories)
By Product
Bundling

9. Penetration Skimming SkimmingPenetration
Move inventory, stimulate D, extend
product life
recover high R&D costs
Price Lining Psychological Promotional

10.  Pay
by
Use
has
picked
up
 A
buyer
is
more
informed
(not
intelligent!)
 Internet
has
changed
the
fundamentals
-­‐
Has
benefited
both
buyer
and
seller
 Buyer:
Price
comparisons,
Offers,
Discounts,
Shared
Coupons,
Smart
Borrow
etc
 Seller:
Larger
Buyer
base,
Smart
supply
chain
management,
Better
Value
maximization
and
Appropriation
possible,
Can
take
advantage
of
the
SEOs
&
Targeted
Advertisements
etc

11. Prof
Shivananda
R
Koteshwar
Director,
The
Amaatra
Academy
shivoo@pes.edu
/
Facebook:
shivoo.koteshwar
BLOG:
http://shivookoteshwar.wordpress.com
SLIDESHARE:
www.slideshare.net/shivoo.koteshwar