MONEY HONEYPRICING STRATEGY Aravind T S

LEAD College of Management

WHAT IS MEANT BY PRICE ?

price is the quantity of payment or compensation given by one party to another in return for goods or services.

Revenue generating

PRICING The only part of marketing mix that is

revenue generating all the others are cost

Pricing is the process of determining what a company will receive in exchange for its products .

SETTING THE PRICE1. Selecting objective 2. Determining demand 3. Estimating costs4. Analyzing competitors cost,price and

offers 5. Selecting a pricing method 6. Selecting final price

STEP.1 – SELECTING PRICING OBJECTIVE Survival :-Short term pricing objective are set in order to survive

Profit :- The objective is to maximise profit Return on investment :-Price are set to attain a specified return on

the companies investment

Maximum market share :- Higher sales volume will lead to lower unit costs and higher long-run profit. They set the lowest price (IKEA)

Maximum market skimming :- companies unveiling a new technology favour setting high price to maximise market skimming .price starts high and slowly rollback

Product quality leadership :- Starbucks , CCD, BMW , Mercedes,Taj have positioned as leaders in quality , with premium pricing and very loyal customer base

STEP.2 - DETERMINING DEMAND

Each price will lead to a different impact on a company’s marketing objective

Inelastic Demand:-the situation in which the supply and demand for a good are unaffected when the price of that good or service changes. Inelastic Demand : demand for

a product is sensitive to price changes

ESTIMATING COST Fixed cost : salaries, rent ,intrest Variable cost : vary directly with the

level of production. Total cost : Fixed + Variable cost Average cost : Cost per unit .

ANALYZING COMPETITORS COST,PRICE AND OFFERS

The firm must take competitors cost , price , and possible price reactions .

FIXING THE PRICING

The price of the product should be determined in such a way as to give a fair return to the producer, a good margin to the middlemen and a reasonable price to the consumer .

PREMIUM PRICING Use a high price where there is a

unique brand. This approach is used where a

substantial competitive advantage exists and the marketer is safe in the knowledge that they can charge a relatively higher price

SKIMMING A very high price is fixed by a company

for a new product Earn max profit at earliest Deliberate to built up the image of

quality and prestige of the product . Only for specialty goods No competition , if yes then showing

competitive advtage

BAIT Two products are manufactured by a

firm, and the price of one product is kept low and the price of the other product is kept high .

Selling high price product by showing the low price

Eg : Car, Fast food , Computers

PSYCHOLOGICAL PRICING.

This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. 

For example Price Point Perspective (PPP) 0.99 Paise not 1 rupee.

Eg:- Bata

PRODUCT LINE PRICING.

Different products of different prices are manufactured , but the price of all the product are determined in a line

Say as :- 25,35, 40 etc

OPTIONAL PRODUCT PRICING

Companies will attempt to increase the amount customers spend once they start to buy.

 For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

PROMOTIONAL PRICING.

Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free), money off vouchers and discount

PRODUCT BUNDLE PRICING.

Here sellers combine several products in the same package.

his also serves to move old stock. Blu-ray and videogames are often sold using the bundle approach once they reach the end of their product life cycle. 

GEOGRAPHICAL PRICING.

Geographical pricing sees variations in price in different parts of the world. 

shipping costs increase price n some countries there is more tax on

certain types of product which makes them more or less expensive

VALUE PRICING

This approach is used where external factors such as recession or increased competition force companies to provide value products and services to retain sales 

 e.g. value meals at McDonalds and other fast-food restaurants. 

http://www.youtube.com/watch?v=LX7gfhv2o5U

PENETRATION PRICING The price charged for products and

services is set artificially low in order to gain market share. 

http://www.youtube.com/watch?v=EPYOlJ9tBHM

ECONOMIC PRICING This is a no frills low price. The costs of marketing and promoting a

product are kept to a minimum.

Budget airlines are famous for keeping their overheads as low as possible and then giving the consumer a relatively lower price to fill an aircraft. The first few seats are sold at a very cheap price (almost a promotional price) and the middle majority are economy seats, with the highest price being paid for the last few seats on a flight (which would be a premium pricing strategy). 

http://www.youtube.com/watch?v=jmNrvlQ73pU

CHANGING PRICING ENVIRONMENT Buyers can : Get instant price comparison from

thousand of vendors (Eg: mysimon.com, flipcart,pricescan.com)

Name there price and have it met (priceline.com)

Get products free : Free software movement that started

FREEMIUM STRATEGY My space Skype Adobe gave away PDF reader for

free in 1994

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