PRICING
→ → → → → → → Aarthi Manoharan Ajmal Khan R.Kanmani S.Karthikeyan S.Prashanth Sridharan G Vivin Joseph Raj G
Content
Adapting Initiating
Setting the price the price and responding to price changes
Price
Price: Not Set Utility: Value:
The monetary medium of exchange.
just a number on a tag. by negotiations between buyers and sellers.
The attribute that makes it capable of want satisfaction The worth in terms of other products
Buyers and Sellers
Buyers
Sellers
Get instant price comparisons from thousands of vendors. Name their price and have it met. Get products free.
Monitor
customer behaviour and tailor offers to individuals. Give certain customers access to special prices.
Negotiate prices in online auctions and exchanges.
o n o c E y m
d o o G e u l a V
Product Quality
r e p u S e u l a V
h g i H e u l a V
i m m u m ee rr P iP m u e u l ea u lV a V
High
Medium
M u i d e m e u l a V
c r e v O n i g r a h g
Marketing mix strategies on Price - Quality
Low High
o n o c E y m
e s l a F
O p i R f f
Price
Medium
Low
Setting the Price
A firm
must set the price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it enters bids on new contract work. firm must decide where to position its product on quality and price.
The
Setting Pricing Policy
1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price
Types of Costs
Costs that don’t Costs that don’t vary with sales or vary with sales or production levels. production levels. Executive Salaries Executive Salaries Rent Rent
Fixed Costs Fixed Costs (Overhead) (Overhead)
Variable Costs Variable Costs
Costs that do vary Costs that do vary directly with the directly with the level of production. level of production. Raw materials Raw materials
Total Costs = Fixed cost + Variable Cost Total Costs = Fixed cost + Variable Cost for a given level of production for a given level of production
Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts
Responding to price changes
HOMOGENOUS PRODUCTS A firm can search for
NON-HOMOGENOUS PRODUCTS
ways to enhance its augmented product. If the competitor raises its price, other firms might not match it if the increase will not benefit the industry as a whole. Then the leader will need to roll back the increase.
A firm
has more latitude Needs to consider:
Why competitor changed the price? Temporary or permanent price change? What will happen to the company’s market share and profits if it does not respond?
Price-reaction program to meet a competitor’s price cut
Has competitor cut his price? Ye s Is the price likely to significantly hurt our sales? N o N o Ye s No Is it likely to be a permanent price cut? Ye s Hold our price at present level; continue to watch competitor’s price How much has his price been cut?
By less than 2% Include a cents-off coupon for the next purchase
By 2-4% Drop price by half of the competitor’s price cut