PRICING POLICIES
Module 5
DEFINATION
? Price may be defined as exchange of goods and services in terms of money. ? Its is a monetary numerical value attached to a good or service or asset.
Objectives of Pricing
? ? ? ? ? ? ? ? To maximize profit Price stability Competitive situation Achieving a target-Return Capturing a market Ability to pay Long-Run welfare of the firm Margin of profit to middle man
Price sensitivity
? ? ? ? ? ? ? Unique value effect Substitute awareness effect Difficult comparison effect Total expenditure effect Sunken Investment Effect Price Quality Effect Inventory effect
Factors affecting Pricing Policies
? Internal factors ± Marketing mix ± Product differentiation ± Cost of the product ± Objectives of the firm ? External Factors ± Demand ± Competition ± Suppliers ± Economic conditions ± Buyers ± Government
Methods of Pricing Policies
? ? ? ? Cost Oriented Pricing Policy Demand oriented Pricing Policy Competition oriented Pricing Policy Contribution Approach to Pricing
Cost Oriented Pricing Policy
? ? ? ? Full cost Pricing Marginal Analysis Break even point pricing Rate of return Method
Demand oriented Pricing Policy
? What the traffic can bear pricing ? Skimming pricing ? Penetration pricing
Competition oriented Pricing Policy
? ? ? ? Parity pricing Pricing below competitive level Pricing above competitive level Sealed bid pricing
Contribution Approach to pricing
Transfer Pricing
? A transfer price is a price used to measure the price of goods or services furnished by a profit center to other responsibility centers within a company.
Objectives
? ? ? ? ? Profitability Maximum Utilisation of plant capacity Performance evaluation Motivate managers Minimise tax
Transfer Pricing method
? Cost Based Transfer Pricing ? Market Based Transfer Pricing ? Negotiated Transfer Pricing
Cost Based Transfer Pricing
? ? ? ? ? Actual Cost of Production Variable Cost Standard Cost Cost of sales Cost of sales Plus
Market Based Transfer Pricing
? Transfer price is based on the Market price.
Negotiated Transfer Pricing
? The price is set as per the negotiation by the managers of the respective responsibility centers
doc_609676897.ppt
Module 5
DEFINATION
? Price may be defined as exchange of goods and services in terms of money. ? Its is a monetary numerical value attached to a good or service or asset.
Objectives of Pricing
? ? ? ? ? ? ? ? To maximize profit Price stability Competitive situation Achieving a target-Return Capturing a market Ability to pay Long-Run welfare of the firm Margin of profit to middle man
Price sensitivity
? ? ? ? ? ? ? Unique value effect Substitute awareness effect Difficult comparison effect Total expenditure effect Sunken Investment Effect Price Quality Effect Inventory effect
Factors affecting Pricing Policies
? Internal factors ± Marketing mix ± Product differentiation ± Cost of the product ± Objectives of the firm ? External Factors ± Demand ± Competition ± Suppliers ± Economic conditions ± Buyers ± Government
Methods of Pricing Policies
? ? ? ? Cost Oriented Pricing Policy Demand oriented Pricing Policy Competition oriented Pricing Policy Contribution Approach to Pricing
Cost Oriented Pricing Policy
? ? ? ? Full cost Pricing Marginal Analysis Break even point pricing Rate of return Method
Demand oriented Pricing Policy
? What the traffic can bear pricing ? Skimming pricing ? Penetration pricing
Competition oriented Pricing Policy
? ? ? ? Parity pricing Pricing below competitive level Pricing above competitive level Sealed bid pricing
Contribution Approach to pricing
Transfer Pricing
? A transfer price is a price used to measure the price of goods or services furnished by a profit center to other responsibility centers within a company.
Objectives
? ? ? ? ? Profitability Maximum Utilisation of plant capacity Performance evaluation Motivate managers Minimise tax
Transfer Pricing method
? Cost Based Transfer Pricing ? Market Based Transfer Pricing ? Negotiated Transfer Pricing
Cost Based Transfer Pricing
? ? ? ? ? Actual Cost of Production Variable Cost Standard Cost Cost of sales Cost of sales Plus
Market Based Transfer Pricing
? Transfer price is based on the Market price.
Negotiated Transfer Pricing
? The price is set as per the negotiation by the managers of the respective responsibility centers
doc_609676897.ppt