Beruflich Dokumente
Kultur Dokumente
BY
AKASH SAXENA
Contents
Pricing decisions
Pricing objectives
Policies methods of setting price
Pricing strategies
By Akash Saxena
The second P
By Akash Saxena
Definition
Price
The amount of money charged for a product or service,
or the sum of the values that consumers exchange for
the benefits of having or using the product or service.
By Akash Saxena
Major Influences on
Pricing Decisions
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The Nature of Price
Price
The value exchanged for products in a marketing exchange
Barter
The trading of products; the oldest form of exchange
Terms Used to Describe Price
Tuition, premium, fine, fee, fare, toll, rent, commission, dues,
deposit, tips, interest, taxes
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The Nature of Price (cont’d)
Average total cost The sum of the average fixed cost and the
average variable cost
Breakeven Point
The point at which the costs of producing a product equal the
revenue made from selling the product
The point after which profitability begins
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Determining the Breakeven Point
FIGURE 20.7
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Factors That Affect Pricing Decisions
FIGURE 20.8
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Factors to Consider When Setting Price
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Factors to Consider When Setting Price
By Akash Saxena
Factors to Consider When Setting Price
By Akash Saxena
Factors to Consider When Setting Price
By Akash Saxena
Factors to Consider When Setting Price
By Akash Saxena
Factors to Consider When Setting Price
By Akash Saxena
Factors to Consider When Setting Price
By Akash Saxena
Factors Affecting Pricing Decisions
By Akash Saxena
Factors Affecting Pricing Decisions (cont’d)
Costs
Set a floor price—products must be sold above their costs if the
firm is to remain in business.
Reducing costs increases productivity and profitability.
Using labor-saving technologies
Focusing on quality
Establishing efficient manufacturing processes
Other Marketing Mix Variables
Price/quality image of the product or brand
Selective or intensive product distribution
Product pricing used as a promotional tool
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Factors Affecting Pricing Decisions (cont’d)
By Akash Saxena
Factors Affecting Pricing Decisions (cont’d)
By Akash Saxena
Factors Affecting Pricing Decisions (cont’d)
By Akash Saxena
Factors Affecting Pricing Decisions (cont’d)
Competition
Pricing
to match competitors’ prices
Judging competitors’ responses to adjusting prices
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Price Discounting
Cumulative Discounts
Quantity discounts aggregated over a stated period
Noncumulative Discounts
One-time reductions in price based on specific factors
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Price Discounting (cont’d)
Cash Discount
A price reduction given to buyers for prompt payment or cash
payment
Seasonal Discount
A price reduction given to buyers for purchasing goods or
services out of season
Allowance
A concession in price to achieve a desired goal
By Akash Saxena
By Akash Saxena
Pricing for Business Markets
Geographic Pricing
Reductions for transportation costs and other costs related to
the physical distance between buyer and seller
Type Pricing method
F.O.B. factory The price of the merchandise at the factory, before
shipment
F.O.B. destination A price indicating that the producer is absorbing
shipping costs
Uniform geo- Charging all customers the same price, regardless of
graphic pricing geographic location
Zone pricing Pricing based on transportation costs within major
geographic zones
Base-point pricing Geographic pricing combining factory price and
freight charges from the base point nearest the buyer
Freight absorption Absorption of all or part of actual freight costs by the
pricing seller
By Akash Saxena
Pricing for Business Markets (cont’d)
Transfer Pricing
The price of products that one organizational unit charges
when selling to another unit in the same organization
Actual full cost
All fixed and variable costs divided by the number of units
produced
Standard full cost
Pricing based on what it would cost to produce the goods at full
plant capacity.
Cost plus investment
Full cost plus internal cost of assets used in production
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Pricing for Business Markets (cont’d)
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General Pricing Approaches
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General Pricing Approaches
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General Pricing Approaches
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General Pricing Approaches
Revenues
1000 Target Profit $200,000
800 Total Costs
Thousands Break-even
of Dollars point
600
400
Fixed Costs
200
0 10 20 30 40 Quantity To Be Sold To
Sales Volume in Thousands of Units Meet Target Profit
By Akash Saxena
General Pricing Approaches
Value-Based Pricing:
Uses buyers’ perceptions of value rather than seller’s
costs to set price.
Measuring perceived value can be difficult.
Consumer attitudes toward price and quality have
shifted during the last decade.
Introduction of less expensive versions of
established brands has become common.
By Akash Saxena
General Pricing Approaches
Value-Based Pricing:
Business-to-business firms seek to retain pricing power
Value-added strategies can help
By Akash Saxena
General Pricing Approaches
Competition-Based Pricing:
Also called going-rate pricing
May price at the same level, above, or below the
competition
Bidding for jobs is another variation of competition-
based pricing
Sealed bid pricing
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Pricing strategies
Premium pricing
Uses a high price, but gives a good product/service
exchange e.g. Mercedez Benz
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Penetration pricing
Penetration pricing
offers low price to gain market share - then increases price
e.g. Nirma Washing Powder
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Economy Pricing
Economy pricing
placed at ‘no frills’, low price
e.g. Southwest Airlines, Deccan Airlines
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Price Skimming
Price skimming
where prices are high - usually during introduction
e.g new albums or films on release
ultimately prices will reduce to the ‘parity’
By Akash Saxena
Psychological Pricing
Psychological pricing
to get a customer to respond on an emotional, rather than
rational basis
.e.g Rs. 99p not Rs. 100 price point perspective
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Product Line Pricing
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Pricing variation
Pricing variations
‘off-peak’ pricing, early booking discounts, etc
e.g Hotels and Resorts
By Akash Saxena
Optional Product Pricing
Optional product-pricing
e.g. optional extras - BMW famously under-equipped, Dell
By Akash Saxena
Geographical Pricing
Geographical pricing
different prices for customers in different parts of the world
e.g. Include shipping costs, or place
By Akash Saxena
Ten ways to ‘increase’ prices without increasing price - Winkler
By Akash Saxena
Produce less of the lower margin models in the
line
Write penalty clauses into contracts
Change the physical characteristics of the
product
By Akash Saxena
New-Product Pricing Strategies
By Akash Saxena
New-Product Pricing Strategies
By Akash Saxena
Thanks
any Questions?
By Akash Saxena