PRICING STRATEGIES

Presented By: VINEETHA N C & RENJITHA C R

Pricing Strategies The pricing decisions

management makes to fit the changing competitive situations met by specific product are its pricing strategies.

The pricing strategies are specific and for short periods

Pricing strategies available to marketers

Price-adjustment StrategiesAccount for customer differences and

changing situation.

Product mix pricing strategiesFor related products in the product

mix

New-Product Pricing strategiesIntroductory stages of a product life

cycle

1. New Product Pricing Strategies

Market-Skimming Pricing

Market-Penetration Pricing

Market Skimming Pricing Setting a high price for a

new products to skim maximum revenue.

The company makes fewer but more profitable sales.

Example: Sony high-definition televison

Market-Penetration PricingSetting a low price for a new

product in order to attract a large number of buyers and market share.

Example: Wal-Mart and and other discount retailers

Dell used this strategy to enter the personal computer market

2. Product Mix Pricing Strategies

Product Line

Pricing

Optional- Product Pricing

Captive-Product Pricing

By-Product Pricing

Product Bundle Pricing

Product Line pricingSetting the price steps between

various products in a product line,

based on cost differences between the products, customer evaluation of different features, and competitors prices.

Example: Gramophone sells high quality sound system, ranging in price from $5000 to $120000.

Optional-Product Pricing The pricing of optional or

accessory products along with a main product.

Example: Refrigerators come with optional ice makers.

Captive-Product Pricing Setting a price for products

that must be used along with a main product, such as blades for a razor and film for a camera.

In the case of services , this strategy is called two-part pricing. The prices of service is broken in to a fixed fee plus a variable usage rate.

By-Product pricing Setting a price for by-product

in order to make the main product’s price more competitive.

Example: paper maker MeadWestvaco has turned what was considers chemical waste in to profit-making products.

Product Bundle Pricing Combining several products

and offering the bundle at a reduced price.

Example: Fast food restaurants bundle a burger, fries, and a soft drink at a combo price.

3. Price-Adjustment Strategies Discount and Allowance Pricing

Segmented Pricing Psychological Pricing Promotional Pricing Geographical Pricing Dynamic Pricing International Pricing

Discount and AllowanceReducing prices to reward customer responses such as paying early or promoting the product.

Discount & Allowance Pricing

• A straight reduction in price on purchase during a stated period of time.

Discount

Types of discountsCash Discount: price reduction to buyers who pay their bills promptly.Seasonal Discount: price reduction to buyers who purchase merchandise or services out of season.Trade discount: also known functional discount allowed in the form of deduction from the list price.

Quantity Discount: price reduction to buyers who buy large volumes.Such discount provide an incentive to the customers to buy more from one given seller.

• Promotional money paid by manufactures to retailers. E.g.: free samples, advertisement allowances ,window display allowances etc..

Allowance

Segmented PricingSelling a product or service at two or more prices , where differences in prices is not based on differences in costs.

Segmented Pricing

Customer Segmented

Product Form

Location Pricing

Time pricin

g

• Different customers pay different prices for same product or services.

Customer

Segmented

pricing• Different versions

of the product are priced differently but not according to differences in their cost

Product form

pricing

• Company charges different prices for different location.

Location pricing

• Firm varies its price by the season.

Time Pricing

Psychological PricingA pricing approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product.

Reference prices One of the aspect of

psychological pricing.Prices that buyers carry in

their minds and refer to when looking at a given product.

Promotional PricingCompanies will temporarily price their products below the list price and sometimes even below cost, to increase short-run sales.Example: Super Market and department stores

Geographical PricingSetting prices for customers located in different parts of the country or world.

FOB-origin pricing

Uniform-

delivered

pricing

Zone pricing

Basing-point pricing

Freight-absorpti

on pricing

• Goods are placed free on board a carrier; the customer pays the freight from the factory to the destination

FOB-origin pricing

• The company charges the same price plus freight to all customers, regardless of their location.

Uniform-

delivered

pricing

• Company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone higher the price.

Zone pricin

g

• Seller designate some city as a basing point and charges all customers the freight cost from that city to the customer.

Basing-

point pricing

• The seller absorb all or part of the freight charges in order to get desired business.

Freight-absorpti

on pricing

Dynamic PricingAdjusting prices continually to meet the characteristics and needs of individual customers and situations.Example: Internet sellers like Amazon.comDell use this strategy to achieve a real time balancing of supply and demand for computer components.

International PricingCompanies that market their

product internationally must decide what prices to charge in different countries in which they operate.

In some cases company can set uniform worldwide price.

Example: Boeing sell its jetliners at about the same price everywhere.

ReferencePrinciples of marketing – Philip

Kotler & Gary Armstrong – Pearson Publication

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