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Pricing Methods

By- Karan Shah (140)

Shweta Shinde (152)

Sanmeet Surve (160)

Kiran Uikey (171)

Akanksha Wattal (176)

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Steps in setting up a price

1. Selecting the pricing objective

2. Determining Demand

3. Estimating Cost4. Analyzing Competitors Costs, Prices, and

Offers

5. Selecting a Pricing Method6. Selecting the Final Price

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Markup Pricing

Going-rate Pricing

Target-Return Pricing

Perceived Value Pricing

Value Pricing

Auction-Type Pricing

Psychological Pricing

Group Pricing

Pricing methods

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Markup Pricing

Most elementary method of pricing

Standard markup added to the products cost

Calculation :

For 30% markup priceMarkup price = Unit cost

1desired return on sales

Where,Unit Cost = Variable cost + fixed cost

Unit sales

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Markup Price

Products with the biggest markup pricing:

Prescription medicine have the highest

markups.

Movie theater popcorn/candy.

Branded clothing

Restaurant drinks (hard drinks and soda)Packaged drinking water

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Going rate pricing

The product is priced on the basis of the

prevailing market price.

Mostly applicable for the homogeneous

products with little variations.

eg. Aluminum, Steel, Plastic products

It is used where less competition is required.eg. Bank, Supermarkets,

Soft drinks

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Target rate of Return Pricing It determines the price that would yield its

target rate of return on investment (ROI).

Target-return price=

Unit cost+(Desired Return x Invested Capital)Unit Sales

Electric and Gas companies

Automobile manufacturers likeGeneral motors, Hyundai

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Perceived value pricing

Based on customers perceived value

i.e how much customers are willing to pay for

it

Perceived value elements

Key-to deliver more value than competitor

Lifetime operating costs will be low Example-Apple

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Value pricing

To win loyal customers by charging low price

for a high quality offering

Reengineering companys operations

To attract large number of value-conscious

customers

Major trend in the computer industry Example- McDonalds

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Auction Pricing

English auctionsAscending bidseg. IPL , Ebay

Dutch auctions Descending bids

eg. IPO shares , Passing a tender

Sealed-bid auctions

bidding price is not revealed

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Psychological Pricing

Price based on human Psychology

Prefers 2 digit number over 3 digit and so on

Price ending with an odd digit

Use words like special , sale

Packaging style

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Group Pricing

Consumers and or business buyers join

groups to avail off volume discounts

Groceries for purchases like poultry, frozen

meat, dairy and bakery etc.

Construction companies

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Group Purchasing Organization

Entity created to leverage the purchasing

power of a group of businesses to obtain

discounts from vendors based on the

collective buying power of the GPO members

Healthcare GPO, Foodservice GPO, Industrial

manufacturing GPO

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