pricing methods n strategies
TRANSCRIPT
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PRICINGMETHODSAND
STRATEGIES
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CONTENTS PricingMethods
Pricingstrategies
Implementation
Conclusion
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A Framework for Developing andApplying a Pricing Strategy
Objectives
Pricing methods
Pricing Strategy
Implementation of Pricing Strategy
Price Adjustments
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METHODSINPRICING
Cost-basedpricing
Demand-basedpricing Competition-basedpricing
Value-basedpricing
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Cost-basedPricing Settingofpricebasedontotalcostperunit
Methods:-
ostpluspricing
argetpricing
arginalcostpricing
reak-evenpricing
+Profit goals
(Merchandise,service, and
overhead
costs)
R
O
I
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computedbyaddingacertain
percentageofprofittocostoftheproductperunit.
Costisaddedwithpredeterminedtarget
rateofreturnoncapital
Priceisdeterminedonthebasesof
variablecost
Usesbreakevenanalysisby
determiningnumberofunitsoldtogenerate
revenuetocovertotalcost
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Demandbasedpricing Demandisbasicfactor
Consumerresponsestovariouspricepoints
analyzedtoarriveathighestacceptableprice
Methods
ifferentialpricing
remiumpricing
eutralpricing
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Sameproductissoldatdifferentpricestodifferentcustomerindifferentplacesatdifferentprices
productorbrandshouldbepositionedatthetopofthemarketandmustoffergreatervalueonqualitativetermsthansimilar
brand
offeringextravalueorbenefitswithbrandcostorpriceremainingcompetitive
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Competitionbasedpricing
Fixingpricesmainlyonthebasisofpricesfixedby
competitors
Productpricesarefixednotoncostordemandbut
onbasisofcompetitorsprice
Methods
oingratepricing onventionalpricing
ealbidpricing
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chargingpriceaccordingtowhat
competitorsarecharging
Pricegetfixedbecausethey
haveprevailedoveralongperiodoftime
Priceisfivedbasedonhowthe
competitorpricetheirproduct
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ValueBasedPricing
Priceisbasedonvaluetocustomers
Examplesincludestatusproducts/exclusiveproducts
Methods
erceived-valuepricing
alueformoneypricing
The Ferrari FXX with a price tag of$1.7million was so exclusive thatyou had to be invited to buy one.
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Concernwithsettingthepriceonthe
basisofvalueperceivedbythebuyerof
theproductratherthansellercost
Priceisbasedonthevaluewhich
thecustomergetsfromproducttheybuy.
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Pricing Strategies
Developing a pricing strategyis a continuous marketing processand is undertaken when:
A new product is introduced. An existing product is revised.
The competitive environment changes.
A product moves through its life cycle. A competitor initiates a price change.
Costs rise or fall dramatically.
The firms prices come under government
scrutiny.
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Stepsinpricingstrategies
Selectingtargetmarkets
Studyingconsumerbehavior Identifyingcompetition
Assigningpricearoleinmarketingmix
Relatingcostanddemand
Determiningstrategicprices
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PricingstrategiesMarket-SkimmingPricing:Settingahighinitialpriceforanewproduct.
Worksifproductisnew,distinctiveanddesired EarlyinProductLifeCycle,whendemandinelastic
Toattracttheconsumersofhighincomegroup
Market-PenetrationPricing:Settingalowinitialpriceforanewproduct.
Worksiflargemarket,elasticdemand
Economiesoflargescaleproductionarepossible
Todiscouragenewcompetition
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SkimmingVsPenetration
Sufficientbuyersneeded
withinelasticdemand
Economiesofscalenot
importanttocosts
Barrierstoentry(patent)
ShortPLC
Shorttermprofit
maximization
Buyersneedwithelasticdemand
Economiesofscalehelpreducecosts,profits
Discouragecompetitionwithlowcost,smallmargins
ExpectedlongPLC
Increasingmarketshareandsalesvolume
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Implementing Pricing Strategies
Price quality associationOdd pricing
One price/Flexible pricing
Customary/Variable pricing
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Implementation
Price lining
prestige pricingLeader pricing
Price bundling
Geographic pricing
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Conclusion
It analyzes sales-based, profit-based,pricing methods, and describes the role ofa broad price policy.
It examines and applies the approaches toa pricing strategy.
It discusses several specific decisions thatmust be made in implementing a pricingstrategy.
an overall frame work of how price can be
adjusted to meet the needs of the market
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