pricing the offer

8/8/2019 Pricing the Offer

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PRICING THE OFFERPRICING THE OFFERBy

Prakash Dutta


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Introduction

Pricing Objectives

Product-Mix Strategies

Market entry strategies

Price determination

Price adjustment

Price elasticity of demand

Pricing strategy

Finalization of price

CONTENTSCONTENTS


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Price is the value placed on what is exchanged.

Price represents the value of a good or service among potential purchasesand for ensuring competition among sellers in an open market economy.

Pricing is a determinant of the market demand for the product. Price represents the value of a product among potential purchases.

Price reflects quality status of a product.

INTRODUCTIONINTRODUCTION


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I.

II.

III.Profitability objectives- It involves profit levels and target return. Profit iswhat remains after paying all the cost and expenses out of salesrevenue.

IV.

V.

VI.Volume objectives- Include sales maximization and market-share goals,which are specified as percentage of certain markets.

VII.

VIII.

IX.Meeting objectives- Some prices are kept to beat the competition bybeating the pricing leaders prices. To do this marketers must be readyto frequently change price aggressively and quickly .

X.

XI.

XII.Social and ethical objectives- NGO and Government agencies use suchobjectives to cover their costs wherever possible and to raise money for

their objectives.

PRICING OBJECTIVESPRICING OBJECTIVES


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Product mix- strategies include the following:1.

2. Product line pricing is setting the price steps between various products in aproduct line based on cost differences .

3.

4. Optional product pricing is the pricing of optional or accessory products

along with a main product.5.

6. creative product pricing is setting a price for products that must be alongwith a main product, such as a film for a camera.

7.

8. By product pricing is setting price for a by product in order to make the

main products price more competitive.9.

10.Product bundle pricing is combining several products and offering thebundle at a reduced price.

PRODUCT MIX STRATEGIESPRODUCT MIX STRATEGIES


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Skimming pricing policy involves setting prices of products relatively higher

then that of similar products and then gradually lowering the prices. Thispolicy is affective where the firm has substantial lead over thecompetition with a new product.

Penetration policy pricing is such where the price of the product entering ina new market is kept relatively low so that it can secure a wide market

acceptance that will allow the company to raise the price later.

PRICE DETERMINATIONPRICE DETERMINATION Market segmentations identify market segments that will respond to

products priced to meet their needs.

Price is a basic regulator of the economic system. Demand and supplydetermine the price in a competitive market. The view of price determination where the firm estimates how its costvaries at various output levels, production levels, marketing strategies,offers is known as cost-based pricing.

MARKET ENTRY STRATEGIESMARKET ENTRY STRATEGIES


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Prices are also adjusted taking into account the following matters:

1.

2. Psychological pricing shows the fact that customer often equate the qualityof the product with the price of the product. It also tells that certainprices are more appealing than others. Some kinds of pricing arereference pricing and odd pricing.

3. Discount and allowances has the effect of reducing prices to reward thecustomer responses such as paying early or promoting the product.

4. Geographic pricing is such where price is influenced geographically where

the company decides on how to price distant customer. FOB and Zonepricing are two types of geographical strategies where customer paysfor actual freight from the factory to the destination in the former andcustomers in the same area pay same freight charges and differentareas pay different charges in the latter. Uniform delivered pricing is onewhere company charges same price plus freight to all customersregardless of the location.

5. Legal consideration and regulatory guidelines cover the pricing practices.

6. Various countries have various currency values which keep on changingand every country have own guidelines for their pricing policies.

PRICE ADJUSTMENTPRICE ADJUSTMENT


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Price elasticity of demand is calculated by dividing the proportionatechange in the quantity demanded by the proportionate change in price.

Q2-Q1 (Q1+Q2)/2 P2-P1 (P1+P2)/2Where

Q1= initial quantityQ2= final quantityP1= initial priceP2= final price

1. Elasticity>1= change in quantity demanded is proportionately larger than

change in price2. Elasticity


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1.

2.

3.The greater the no. of substitute the greater is the elasticity4.

5. Luxury products seem to have greater elasticity than necessity

6.

7. Products consuming large portions of customers income tend to have largerelasticity

8.9. Elasticity tends to be greater over the long run because consumer have

more time to adjust their behavior to price changes

10.

11.A one day sale will result in a different response than a permanent pricedecrease in the same magnitude

12.13.Decreasing the price may resulting a greater increase in quantity

demanded than decreasing it

Factors influencing elasticityFactors influencing elasticity


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Pricing strategy matrixPricing strategy matrix

ECONOMY PENETRATION

SKIMMING PREMIUM

quality

price

low

high

low

high

Pricing st rategies matrix


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1.

2.

3. Premium pricing= using high price where there is uniqueness in the product

or service

4. Penetration pricing= the price is set comparatively low to gain a certainshare of the market

5. Price skimming= price is charged high as there is a substantial advantage

6. Psychological pricing= this kind of pricing is used when marketer wishescustomers to react on an emotional basis rather than rational basis

7. Product line pricing= this is done where there is a range of products orservices the pricing reflects the benefits of parts of the range

8. Optional product pricing= company attempts to increase the amount ofprice by giving by products along with the main product.

9. Product bundle pricing= here sellers combine several products in the samepackage

10.Promotional pricing= this type of pricing is done mainly to promote aproduct and capture customers attention

11.Geographical pricing= this is relative to the change in price of productsalong with the change in the geographical area

12.

Pricing strategiesPricing strategies


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While finalization of price the following attributes are taken into account:

Price and quality perception of the target market customers

Brand equity

Advertising penetration and affects on customers

Price of other products of the firm in relative terms of their importance tothe customers

International prices depend upon the relative balance of payment situationwith a particular country, currency exchange rates and tariffs.

It could be in 2 parts one barter and the other cash payment

Finalisation of priceFinalisation of price


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THANK YOUTHANK YOU

pricing the offer

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