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Pricing Unit II

The document discusses factors to consider when setting price for products and services. It outlines that price is what the seller charges and the buyer pays, and is influenced by internal factors like costs, marketing objectives, and external factors like competitors' prices and economic conditions. The document also differentiates between cost-based and value-based pricing approaches.

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Prince kumar
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40 views

Pricing Unit II

The document discusses factors to consider when setting price for products and services. It outlines that price is what the seller charges and the buyer pays, and is influenced by internal factors like costs, marketing objectives, and external factors like competitors' prices and economic conditions. The document also differentiates between cost-based and value-based pricing approaches.

Uploaded by

Prince kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PRICING

11-
1
What is Price
⚫ For Seller- What he charges for his
product.
⚫ For Buyer- What he pays to avail the
product.

11-
2
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
11-
product or service.
3
Price Has Many
Names
• Rent
• Fee • Tuition
• Rate • Fare
• Bribe
• Commissi • Toll
• Salary
on • Premium
• Wage
• Assessme • Retainer
• Interest
nt
• Tax
11-
4
What is Price?

⚫ Price and the Marketing Mix:


⚫ Only element to produce revenues
⚫ Most flexible element
⚫ Can be changed quickly

11-
5
Factors Affecting Price
Decisions

11-
6
Factors to Consider When Setting
Price

Internal Factors ⚫ Market


positioning
• Marketing influences pricing
strategy
•
objectives
Marketing mix ⚫ Other pricing
objectives:
strategies
⚫ Survival
• Costs
Organizational
⚫ Current profit
• maximization
considerations ⚫ Market share
leadership
⚫
11-
7
Product quality
Factors to Consider When Setting
Price

Internal Factors ⚫ Pricing must be


carefully
• Marketing coordinated with
objectives the other
marketing mix
• Marketing mix elements
•
strategies
Costs
⚫ Target costing is
o en used to
• Organizational support product
considerations positioning
11-
8 strategies based
Swatch used
target costing to
manage costs
carefully and
create a watch
offering the right
blend of fashion
and functions at a
price consumers
would pay.

11-
9
Factors to Consider When Setting
Price

Internal Factors ⚫ Types of costs:


⚫ Variable
• Marketing ⚫ Fixed
objectives ⚫ Total costs
• Marketing mix
strategies
⚫ How costs vary at
different
• Costs production levels
• Organizational will influence
considerations price-setting
11-
10
Factors to Consider When Setting
Price

Internal Factors ⚫ Who sets the


price?
• Marketing ⚫ Small companies:
objectives CEO or top
management
• Marketing mix
strategies ⚫ Large companies:
Divisional or
• Costs product line
• Organizational managers

11-
considerations ⚫ Price negotiation
11 is common in
Factors to Consider When Setting
Price

External Factors ⚫ Types of markets


⚫ Pure/Perfect
Nature of market competition
⚫
•
and demand Monopolistic
competition
• Competitors’
costs, prices, ⚫ Oligopolistic
competition
and offers
⚫ Pure monopoly
• Other
environmental ⚫ Consumer
11- elements perceptions of
12
price and value
Factors to Consider When Setting
Price

External Factors ⚫ Consider competitors’


costs, prices, and
possible reactions
• Nature of market when developing a
and demand pricing strategy
• Competitors’ ⚫ Pricing strategy
costs, prices, influences the nature
of competition
and offers
⚫ Low-price low-margin
• Other strategies inhibit
environmental competition

11- elements ⚫ High-price high-margin


13
strategies attract
competition
Factors to Consider When Setting
Price

External Factors⚫ Economic


conditions
• Nature of market ⚫ Affect production
costs

•
and demand
Competitors’
⚫ Affect buyer
perceptions of price
costs, prices, and value
and offers ⚫ Reseller reactions
• Other to prices must be
environmental considered
11-
14
elements ⚫ Government may
limit or restrict
Common mistakes in Pricing
⚫ At times companies are too quick to
reduce their price in order to boost sales
rather convincing customers that their
product is worth high prices.
⚫ Price is too cost oriented rather
customer value oriented
⚫ Pricing do not take other marketing mix
element into account.

11-
15
Cost-Based Versus
Value-Based Pricing

11-
16
Key Determinants of Pricing
• Cost of Production
• Profit Margin desired
• Competitor’s Price
• Govt. Policy of price control/
Tax systems
• Nature of Target segment
• PLC Stage
• Demand Supply conditions
Other key determinants
Pricing may be done for:
❖ Survival
❖ Return on Investment
❖ Market Stabilization
❖ Maintaining or improving market
share
❖ Meeting or following competition
❖ Pricing to reflect product
differentiation
❖ Preventing new entry

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