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What is pricing

o Exchange value of goods & services in terms


of money.
Pricing Objectives

Profit maximization in short run

Profit optimization in long run

A minimum ROI

Achieving a particular sales volume

Achieving a particular market share

Entering new market

Keeping competition out


Method of Pricing Strategy:

Setting pricing objectives.

Analyze various factors which influence the

demand/supply of service.

Pricing policy of competitor.

Selection of appropriate pricing strategy.


Pricing strategies

 Competition-based pricing: Price based upon prices of the


similar competitor products.

 Cost-plus pricing: simplest pricing method (Price = Cost of


Production + Margin of Profit)
Pricing strategies

Creaming or skimming: Selling a product at a high


price.

Limit pricing: Price set by a monopolist to


discourage economic entry into a market.
Pricing strategies

 Loss leader: Selling at a loss.

 Market-oriented pricing: Setting a price based upon analysis


and research.

 Target pricing: Targeted for a particular rate of return.


Pricing strategies

Penetration pricing: Price is deliberately set at low


level to gain customer's interest and establishing a foot-
hold in the market.

Price discrimination: Setting a different price for the


same product in different segments to the market.
Pricing strategies

 Premium pricing: Practice of keeping the price of a product


or service artificially high in order to encourage favorable
perceptions among buyers.

 Predatory pricing: Aggressive pricing intended to drive out


competitors from a market.
Pricing strategies

Contribution margin-based pricing: Maximizes the


profit derived from an individual product.

Psychological pricing: To have a positive


psychological impact
Pricing strategies

Dynamic pricing: Responding to market


fluctuations.

Price leadership: Leads the way in determining


prices, the others soon following.
Pricing strategies

Absorption pricing: Method of pricing in which all


costs are recovered.

Marginal-cost pricing: Setting the price of a product


to equal the extra cost of producing an extra unit of
output.
Laws of Price Sensitivity
Reference Share cost
price Effect
Access to price
Difficult Companies
comparison
effect
Knowledge of
price norms
Buyers price
Price as signal Sensitivity
of quality End-benefit
effect

Fairness
Framing
Expenditure
effect
effect

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