Marketing management
- 2. LEARNING OBJECTIVE Described the major strategies for pricing initiative & new products. Explain how companies find a set of prices that maximize the profit from the total product mix. Discuss the key issues related to initiating & responding to price changes.
- 3. CHAPTER OUTLINE Pricing basics New product pricing strategies Price adaptation Product mix pricing strategies Price changes Responding to price change
- 4. What is “pricing” ? pricing is fundamental aspect of financial modeling and is one of the four Ps of the marketing mix . Pricing is the process of determining what a company will receive in exchange of its product. Pricing factors are – manufacturing cost, market place , competition, market condition & quality of product. ** Armstrong & kotler: “ price is defined as the amount of money charged for a product or services, which customer has to pay .
- 5. ADAPTING THE PRICE price adaptation is the ability of a business to change its pricing models to suit different geographic areas, consumer demands & prevailing incomes. Market play a significant role in price adaptation because pricing strategy is one of the four main components in determining product positioning , which how a company chooses to present product to consumers.
- 6. New Product Pricing Strategy: Pricing strategy : 1. Market skimming pricing 2. Market penetration pricing
- 7. Price skimming : Market skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market . It can be defined as strategy where a consumer will pay highest initial price demanded by a firm. Once the demand of initial consumer is fulfilled it reduce the price of product. Example : mobile phones launched at higher price after certain period price are gradually decreased by company
- 8. Market Penetration Pricing Market penetration pricing sets a low initial price in order to penetrate the market quickly & deeply to attract a large number of buyers quickly to gain market share . The main motive of penetration pricing is to compel customers to buy the low-priced new product . Example : Any new FMCG Product.
- 9. Product-Mix Pricing Strategies Relatively different pricing strategy should be utilised for pricing products, which are a part of the product mix . A combination of prices suitable for the entire mix is selected by the company to ensure the increased revenues. Due to presence of interrelationship between demand & cost of diff products & diff level of competition , this product mix pricing is very challenging.
- 10. Product line pricing : product line pricing takes into account the cost differences between product in the line , customer evaluation of their features , & competitors price . anti dandruff RS. 50 anti hair fall Rs.60 hair cleaner Rs. 55
- 11. Optional product pricing Optional product pricing takes into account optional or accessory products along with the main product. Many company offer optional products , features , & services along with their main product.
- 12. Captive product pricing : captive product pricing involves product that must be used along with the main product. some product require the use of ancillary or captive product. Manufacture of razors & cameras often price them low & set high markups on razors blades & film respectively.
- 13. Two part pricing : Two part pricing where a price is broken into 1) fixed fee 2) variable usage fee service firms often engage in two part pricing , consisting of a fixed fee plus a variable usage fee. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number.
- 14. Product Bundle Pricing : Product bundle pricing combines several products at a reduced price . In case company sells products individually as well as in the form of bundles, it is termed as mixed bundling. The company charge less in case of mixed pack.
- 15. GEOGRAPHICAL PRICING Different regions and different parts of state , country around globe In selecting its products price for different region a business also adapt its marketing strategies 1. Barter 2. Compensation deal 3. Buyback arrangements
- 16. PRICE DISCOUNT & ALLOWANCE Tactic is response to aggressive competition Discounting can be dangerous unless carefully controlled& conceived as a part of overall marketing strategy. TYPES OF DISCOUNT : 1. Cash & settlement discount 2. Quantity discount 3. Promotional discount
- 17. PSYCHOLOGICAL PRICING It uses the customers emotional response to encourage sale Strategic pricing by a company may increase the sale without significantly reducing price. Some cases high price more likely increase sale. this strategy is based on the theory that certain process have psychological impact on consumer than others.
- 18. PRICING STRATEGIES Pricing strategies is important for market –positioning and decision, which depends on the overall business strategies and on marketing plans. Several pricing strategies are: 1. Promotional pricing 2. Discriminatory/differentiating pricing.
- 19. PROMOTIONAL PRICING Several techniques that company uses to stimulate their early purchases: Loss-leader pricing: supermarket and departmental stores lower the price on known brands to maintain the additional store traffic. The leader brand oppose because this can effect their brand image. In this method the manufacture's tries to restrain the mediators from the loss -leader pricing by maintenance if law ,but now has been revoked. Special event pricing: Seller establishes certain prices on seasons to draw more customers .
- 20. Cash rebates: The cash back offers are given on consumers –goods to increase purchase within specific period of time. It also helps in clearing the inventories without cutting price. Low-interest financing: the company offers low –interest financing or no-interest financing to attract the customers. Longer payment terms: Seller, mortgage banks and auto companies stretch loans with low monthly payments. Consumers worry less about the cost of loan and more about what they can afford.
- 21. DISCRIMINATORY/DIFFRENTIATING PRICING Differential pricing is the strategy of selling the same product to different customers at different prices. Customer-segment pricing: the price of the same or different products and services sold to different customer. It depends on ability of customer to pay. Product-form pricing: Seller charges 2 different prices for different versions of product not in proportion to their respective cost.
- 22. Image pricing: Price same product at two different level based on image difference. E.g. a perfume manufacturer can put perfume in one bottle with one name and image and charge 50rs and similarly can put that same perfume in other bottle with different name and image and charge 200rs Channel pricing: Method in which the price depends on the means of delivery of a good or service. E.g. Coca-Cola carries different price depending on whether its purchased in a restaurant, a fast- food etc. Time pricing: Time-based pricing is a pricing strategy in which businesses set flexible prices for products or service based on current market demands.
- 23. INITIATING PRICE CHANGE Price change means hike or reduction in prices. Many perceive that high-quality product tend to cost more and price increase may become an indicator of high quality and vice-versa. A.Initiating price cuts: • Initiating price cuts may appear easier than imitating price changes. • In fact, customer response to price cuts is normally better than Price increase: • There are number of reasons for at company hike prices they are as follows - Technique to avoid pricing cut/ increase situation: • There are some techniques for avoiding problems they are as
- 24. A.Initiating price cuts: • to price increases. • On the other hand, price cuts reduce the profit margin for the company. • The condition that lead a firm to reduce prices are as follows- • Un-utilised production capacity • Excess capacity • Falling market share • Cut-throat competition • Economic down turn Price increase: • Inflation • Products' novelty • To increase profit • Over demand • Shifting in customer perception Technique to avoid pricing cut/ increase situation: • Maintain a sense of fairness • Making low-visibility price moves first • Ways to meet demand without raising prices
- 25. RESPONDING TO PRICE CHANGE Customer reaction • Negative and positive reaction Competitors reaction • Large and few numbers of competitors.
- 27. INITIATING PRICE INCREASE Inflation Products novelty To increase profit Over demand Shifting in customer perception
- 28. BUYERS ACTION TO PRICE CHANGE • Substitute product • Complimentary goods • Avoid purchasing the product COMPETITORS ACTION TO PRICE CHANGE • Reduce manufacturing cost • Launch low price fighting product • Improve quality of product
- 29. THANK YOU..