Download - Pricing Concepts in Marketing
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PARAMJIT SHARMA 1
PRICING
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PARAMJIT SHARMA 2
PRICING
Price is the only Revenue….
….. Rest are costs
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PARAMJIT SHARMA 3
PRICINGWHAT IS PRICE FOR AN OFFERING ?
RENT FOR A BUILDING
Tariff for phone
Airlines,Rly.,Bus, Cab….Fare
Express way…..Toll
Can it be price ?
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PARAMJIT SHARMA 4
PRICING
Price…..Quality…..Segmentation
SEGMENT
ULTIMATEGOLD STD.LUXURYSPF. NEEDSMIDDLEEASE/CONV.ME TOOPRICE ALONE
AUTOMOBILES
Rolls RoyceMercedesAudiVolvoBuickFord EscortHyundaiKia
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PARAMJIT SHARMA 5
PRICING
Price…..Quality…..Segmentation
SEGMENT
.LUXURYSPF. NEEDSMIDDLECONV.EECONOMYME TOOPRICE ALONE
AUTOMOBILES
MercedesHonda CivicOctaviaCheverolet OptraSantroAltoMaruti 800
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PARAMJIT SHARMA 6
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
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PARAMJIT SHARMA 7
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
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PARAMJIT SHARMA 8
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
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PARAMJIT SHARMA 9
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
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PARAMJIT SHARMA 10
PRICING
Price = Value
MissingOpportunity
Un harvestedValue
L
M
H
M H
Perceived Delivered Value
Pri
ce
Paid
Value Received
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PARAMJIT SHARMA 11
PRICING
Factors in setting Prices
5Selecting pricing
Method
6Selecting the final
Price
4Analysing competitorsCosts,prices & offers
3Estimatingcosts
1Selecting pricing
objective
2 Determining Demand
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PARAMJIT SHARMA 12
PRICING1 SELECTING PRICING OBJECTIVE
SurvivalMaximizing Current ProfitMax. Market ShareMax. Market SkimmingMaximising Product QualityNon Profit Organizations.
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PARAMJIT SHARMA 13
PRICING
2 DETERMINING DEMAND
Price SensitivityEstimating demand curvesPrice elasticity of demand
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PARAMJIT SHARMA 14
PRICING
Price Sensitivity
Unique value effectSubstitute awareness effectDifficult comparison effectTotal expenditure effectEnd benefit effectShare cost effectSunk investment effectPrice quality effectInventory effect
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PARAMJIT SHARMA 15
PRICINGMeasuring Demand-Price Relationship
Statistical Analysis
Conducting Price Experiments
Buyers Surveys
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PARAMJIT SHARMA 16
PRICING
Price Elasticity of Demand
A Inelastic demand B Elastic demand
Qty. demanded per period
pri
ce
Pri
ce
Qty. demanded per period
3
2
1oo 105 50 150
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PARAMJIT SHARMA 17
PRICING
3Estimating Costs
•Types & level of prod.•Accumulated Production•Differentiated mktg Offer•Target costing
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PARAMJIT SHARMA 18
PRICING
Types of costs & level of Production
Qty. produced per day Qty. produced per day
A cost behaviour in a fixed size plant
B cost behaviour over diff. size plant
1000
Cost
per
un
it
Cost
per
un
it
1 2 3 4
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PARAMJIT SHARMA 19
PRICING
Accumulated Production1 2 4 8
Cost
per
un
it
10
8
6
4
2
Accumulated Production
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PARAMJIT SHARMA 20
PRICING
44ANALYSING COMPETITORS’ANALYSING COMPETITORS’
COSTS
PRICES &
OFFERS
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PARAMJIT SHARMA 21
PRICING5 SELECTING PRICING METHODMETHODMARK UP PRICING
TARGET RETURN PRICING
PERCEIVED VALUE PRICINGVALUE PRICING
GOING RATE PRICING
SEALED BID PRICING
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PARAMJIT SHARMA 22
PRICING
SELECTING A PRICING METHOD
THREE Cs Model
HIGHPRICE
No Possibledemand
Lowprice
No Possibleprofit
Ceiling Price Ortn.Price Floor Price
CostsComp priceSub,Price
CustomersAssessment ofUPF
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PARAMJIT SHARMA 23
PRICINGMarkup Pricing
Unit Cost Rs20---------------------- =------ = Rs25( 1- Desired Return) 1-0.2
HIGH
SeasonalSlow MovingHigh StorageLife saving Drugs
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PARAMJIT SHARMA 24
PRICINGTarget Return Pricing
Desired Return* Invested Cap---------------------------------- Unit Sales
Unit cost +
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PARAMJIT SHARMA 25
PRICING
Perceived Value Pricing
Attributes
Quality Impurities10% Less than 1% 150
Delivery within 2 wks within 1wk 20
System supply ch’cal total system 80
Innovation less R& D High R & d 300
Service Regional Local 50
St. Offer PremiumOffer
Added Value
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PARAMJIT SHARMA 26
PRICINGVALUE PRICING
EDLP Charging low forHigh quality
Wal-Mart
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PARAMJIT SHARMA 27
PRICING
Save up to 80% on 2002's hottest toys!
$38.00
Was: $69.77
$38.00
Was: $69.77
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PARAMJIT SHARMA 28
PRICING
$26Was$32
$192Was$231
$41Was$61
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PARAMJIT SHARMA 29
PRICINGSee the Big Games on a New TV
The football playoffs are starting, so get ready with a flat-screen model, projection TV or an HDTV.
Philips 50-inch Digital HDTV Monitor 50PP9202
$1,654.00
Was$1874
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PARAMJIT SHARMA 30
PRICINGAuction Pricing
English Auctions
Sealed-BidAuctions
Dutch Auctions
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PARAMJIT SHARMA 31
PRICING
Bid Profit Prob of getting bid
Expected
profit
9500 100 81% 81
10000 600 36 216
10500 1100 9% 99
11000 1600 1% 16
Effects on Different Bids
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PARAMJIT SHARMA 32
PRICINGSELECTING THE FINAL PRICE
Psych
ological
1
M M Influence 2 3 Company
PP
4 Impact on others
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PARAMJIT SHARMA 33
PRICINGAdapting the
Price
Geographical demand & costsMarket Segment RequirementsPurchase TimingsOrder levelsDelivery FrequencyService ContractsGuarantees………
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PARAMJIT SHARMA 34
PRICING
AdaptingThe Price
Geographical
Discounts & Allowances
Promotional
Discriminatory
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PARAMJIT SHARMA 35
PRICINGGeographical
Different or same price……How to get paid
•Barter•Compensation Deal•Buyback•offset
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PARAMJIT SHARMA 36
PRICING
Price Discounts&
Allowances
Cash DiscountsQuantity DiscountsFunctional DiscountsSeasonal DiscountsAllowance Trade-in-Allowance Promotional Allowance
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PARAMJIT SHARMA 37
PRICINGPromotional
Pricing
Loss LeaderSpecial EventsCash RebatesLow interest FinancingLonger Payment TermsWarranties & Service ContractsPsychological Discounting
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PARAMJIT SHARMA 38
PRICINGDiscriminatory
Pricing
Customer Segment Pricing-MuseumsProduct Form Pricing-Cola PackingImage Pricing-PerfumesChannel Pricing-Rly Station..Theatre…5 starLocation Pricing-Balcony..Dress circleTime Pricing..seasons….day…night
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PARAMJIT SHARMA 39
PRICINGProduct Line PricingOperational feature Pri.Captive Product PricingTwo part PricingBy Product PricingProduct Bundling Pricing
Product-MixPricing
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PARAMJIT SHARMA 40
PRICING
INITIATING PRICECUTS
•Low quality trap•Fragile market share trap•Shallow pocket trap
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PARAMJIT SHARMA 41
PRICING
INITIATING PRICE INCREASE
Over DemandInflation
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PARAMJIT SHARMA 42
PRICING
Response To Over demandWithout Raising Price
Shrinking the productSubstitute materialsReducing product featuresRed. Product servicesUsing less Pac. Mat.Red. The No. of sizesCreating economy brand
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PARAMJIT SHARMA 43
PRICING
COMPETITORSCUSTOMERS
ReactionsTo
Price Changes
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PARAMJIT SHARMA 44
PRICING
Responding to Competitors
Price changes
Maintain price &Maintain price & add valueReduce priceIncrease price & Improve qualityLaunch a low price fighter line
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PARAMJIT SHARMA 45
PRICING