Price

Price =Quantity of money by the seller

Quantity of goods & services received by the buyer

Price Decisions

PRICE

GOVT. POLICY

COMPETITORREACTIONS

COSTBARRIERS IN INDUSTRY•Like Technology•Exit Barrier

CORPORATEOBJECTIVE

DEMAND

Pricing Methods

Cost based pricingDemand based pricingCompetition-oriented pricingDifferent pricingGoing rate or “Follow the crowd”

Cost based pricing : Pricing method in which the selling price of the

product is fixed by adding a margin to the cost price.

Depending on the nature of products & market The higher the value of the product the larger

the mark-up & vice-versa.

Demand based pricing What the traffic can bear pricing Skimming pricing Penetration pricing

Pricing Methods (contd…)

Pricing Methods (contd…)

Competition oriented pricing Premium pricing Discount pricing Parity pricing / Going rate pricing

Differential Pricing Charge different prices fir the same product in

different area of market. On the basis of customer class Volume of purchase

Going rate or “Follow The Crowd” The firm prices its product at the same level as

that of the competition Assume that there will be no price wars within

the industry. Not necessarily true that all firms or the leader

firm is operating efficiently In case it is not, it will mean that the follower

firm will also adopt a price level which reflects leader’s inefficiency rather than the firm’s efficiency.

Pricing Methods (contd…)

Price Wars

LOWHIGH

HIGH

LOW

Price Sensitivity

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Value Added Marketing

Maintain &

Grow

Consumer Education

Quit