Description
In modern economies, prices are generally expressed in units of some form of currency. (For commodities, they are expressed as currency per unit weight of the commodity, e.g. euros per kilogram.) Although prices could be quoted as quantities of other goods or services this sort of barter exchange is rarely seen.
“A pound of flesh is what thee take shylock, not an ounce more nor a drop of blood…”
Portia, in “The merchant of Venice”
“The
value decade is upon
your
us… the best way to hold
customers is to constantly figure
out how to perceive
give them what they
more for what they
Jack Welch
perceive less.”
Definitions…
Value is the power of one product to attract another in exchange. When expressed in denominations of money, it becomes price. ? Rent, fee, toll, donation , honorarium…
?
Correlation with other variables of marketing mix
Promotion ? Place ? Product Quality
?
Missed opportunity
Price
Unharvested value
Value
Correlation with Quality
PRICE
High Med Low
High
Premium stgy Over charging stgy Rip off stgy
High Value Stgy Medium value stgy
Super high value stgy Good value stgy
PRODUCT QUALITY
Med
Low
False Economy economy stgy stgy
When fixing a price…
Determine your price objective ? Know the importance of price to your tgt mkt ? Know the demand of your product ? Understand your costs ? Know your competitors ? Determine your pricing strategy
?
Determine your price objective
?
Income oriented objectives
? ? ?
Target return on Investment
? ?
Consider turnover vs. margins
Rent, life saving drugs
Profit maximisation (short Term strategy) Survival (short Term strategy)
?
Sales oriented objectives
?
Market share
?
Reasonable pricing in spite of higher equity Coke
?
Competition oriented objectives
? ?
Avoiding competition
? ?
Underprice for monopoly Match competition and then follow up with strong mkt mix variables coffee Promote state of equlibrium petrol, vegetables
Meeting competition Stabalizing competition
?
?
Know the importance of price to your tgt mkt
?
Who are our customers and what do they want our price to be?
?
Some times higher price sells
Know the demand of your product
?
Price elasticity
?
Big change in price does not bring equivalent or any change in demand
?
bread, insulin
?
Small or no change in price brings big change in demand
? Pastry,
agro perishables
?
Cross elasticity
Understand your costs
Fixed ? Variable ? ABC costing
?
?
pbc the Japanese reverse calculation
?
Target costing
?
Pricing strategies
Differential pricing strategies ? Competitive pricing strategies ? Product line pricing strategies ? Psychological pricing strategies ? Distribution based pricing strategies
?
Differential pricing strategies
?
?
?
One price policy Variable pricing
? ?
Real estate, auction houses, internet Museums, rai l- air fares, fun republic morning shows DVD, cars
Second market discounting
?
? ?
Skimming
? ? ?
Periodic discounting
Offseason, bandhej, rakshabandhan sales
Value pricing – walmart EDLP
Random discounting
Competitive Pricing Strategies
?
?
? ?
Meet the competition Undercut the competition Price leadership / follow the leader
? ? ? ? ? ?
mkt share unaffected When demand is very sensitive to price Substantial economies of scale Threat of strong imitation Mass market concept May lead to predatory pricing
?
Penetration pricing
Reliance, big bazaar
?
Traditional pricing
?
Local phone, candies etc
Product line pricing strategy
Mximise profits for the entire pdt line – total profit pricing rather than item profit pricing
?
Captive pricing
?
Basic pdt cost low, high mark up on supplies
?
?
?
Cameras Gillette Sony playstation software– CD based play station console
?
Loss leader strategy
?
Main offering low priced to enhance traffic
? ?
Discount stores, canmart Bait and switch pricing
Product line pricing strategy
?
Price lining
?
Price points - simplifies decision making for custmer and retailer
? Bata
?
Price bundling
?
Package cheaper than individuals
? Microsoft
office ’97- access, explorer, word, p.point, excel
Product line pricing strategy
?
Two part pricing
?
A fixed price plus a variable fee
? Telephone,
electricity, joy rides in esselworld.
? ?
Optional feature pricing
?
Cars, pizzahut Plasma for vaccines, plastic scrap at core
By product pricing
?
Psychological Pricing
Plays on consumers perceptions and image that the price may build
?
? ?
Reference pricing
?
Catalog, home shopping netwrks, shelf spaces Bata, medicines Infant care pdts, Perfumes, shopping products, cars
Odd versus even price
?
Prestige pricing
?
?
Low interst finance pricing
?
EMIs as reference
Distribution based pricing strategies
? ?
Channel price
?
Coke at fancy restaurant
Seats in a an aircraft, theatre, movie hall
Location Pricing
?
Responding To competitors price changes
No change in price or value offered ? No change in price, enhance offering, augmentation ? Change the price , keep offering same ? Change the price and also change offering and quality ? Introduce new line in new category.
?
You increase prices…
Incremental or radical ? ? Delayed quotation pricing
?
Construction projects, customised jewellery, dresses Floating interest rates
? ? ?
Escalator clauses
?
Unbundling
?
Charge for augmentation
Withdrawal of discounts
Without raising prices …
? ? ?
Reduce the quantum of offering
?
Maggi
Paperbacks, Lifebuoy refill packs
Substitute less expensive raw material
?
Use less expensive packaging material
?
Reduce the no. of sizes in product line ? Create new economy brands
?
doc_684329597.ppt
In modern economies, prices are generally expressed in units of some form of currency. (For commodities, they are expressed as currency per unit weight of the commodity, e.g. euros per kilogram.) Although prices could be quoted as quantities of other goods or services this sort of barter exchange is rarely seen.
“A pound of flesh is what thee take shylock, not an ounce more nor a drop of blood…”
Portia, in “The merchant of Venice”
“The
value decade is upon
your
us… the best way to hold
customers is to constantly figure
out how to perceive
give them what they
more for what they
Jack Welch
perceive less.”
Definitions…
Value is the power of one product to attract another in exchange. When expressed in denominations of money, it becomes price. ? Rent, fee, toll, donation , honorarium…
?
Correlation with other variables of marketing mix
Promotion ? Place ? Product Quality
?
Missed opportunity
Price
Unharvested value
Value
Correlation with Quality
PRICE
High Med Low
High
Premium stgy Over charging stgy Rip off stgy
High Value Stgy Medium value stgy
Super high value stgy Good value stgy
PRODUCT QUALITY
Med
Low
False Economy economy stgy stgy
When fixing a price…
Determine your price objective ? Know the importance of price to your tgt mkt ? Know the demand of your product ? Understand your costs ? Know your competitors ? Determine your pricing strategy
?
Determine your price objective
?
Income oriented objectives
? ? ?
Target return on Investment
? ?
Consider turnover vs. margins
Rent, life saving drugs
Profit maximisation (short Term strategy) Survival (short Term strategy)
?
Sales oriented objectives
?
Market share
?
Reasonable pricing in spite of higher equity Coke
?
Competition oriented objectives
? ?
Avoiding competition
? ?
Underprice for monopoly Match competition and then follow up with strong mkt mix variables coffee Promote state of equlibrium petrol, vegetables
Meeting competition Stabalizing competition
?
?
Know the importance of price to your tgt mkt
?
Who are our customers and what do they want our price to be?
?
Some times higher price sells
Know the demand of your product
?
Price elasticity
?
Big change in price does not bring equivalent or any change in demand
?
bread, insulin
?
Small or no change in price brings big change in demand
? Pastry,
agro perishables
?
Cross elasticity
Understand your costs
Fixed ? Variable ? ABC costing
?
?
pbc the Japanese reverse calculation
?
Target costing
?
Pricing strategies
Differential pricing strategies ? Competitive pricing strategies ? Product line pricing strategies ? Psychological pricing strategies ? Distribution based pricing strategies
?
Differential pricing strategies
?
?
?
One price policy Variable pricing
? ?
Real estate, auction houses, internet Museums, rai l- air fares, fun republic morning shows DVD, cars
Second market discounting
?
? ?
Skimming
? ? ?
Periodic discounting
Offseason, bandhej, rakshabandhan sales
Value pricing – walmart EDLP
Random discounting
Competitive Pricing Strategies
?
?
? ?
Meet the competition Undercut the competition Price leadership / follow the leader
? ? ? ? ? ?
mkt share unaffected When demand is very sensitive to price Substantial economies of scale Threat of strong imitation Mass market concept May lead to predatory pricing
?
Penetration pricing
Reliance, big bazaar
?
Traditional pricing
?
Local phone, candies etc
Product line pricing strategy
Mximise profits for the entire pdt line – total profit pricing rather than item profit pricing
?
Captive pricing
?
Basic pdt cost low, high mark up on supplies
?
?
?
Cameras Gillette Sony playstation software– CD based play station console
?
Loss leader strategy
?
Main offering low priced to enhance traffic
? ?
Discount stores, canmart Bait and switch pricing
Product line pricing strategy
?
Price lining
?
Price points - simplifies decision making for custmer and retailer
? Bata
?
Price bundling
?
Package cheaper than individuals
? Microsoft
office ’97- access, explorer, word, p.point, excel
Product line pricing strategy
?
Two part pricing
?
A fixed price plus a variable fee
? Telephone,
electricity, joy rides in esselworld.
? ?
Optional feature pricing
?
Cars, pizzahut Plasma for vaccines, plastic scrap at core
By product pricing
?
Psychological Pricing
Plays on consumers perceptions and image that the price may build
?
? ?
Reference pricing
?
Catalog, home shopping netwrks, shelf spaces Bata, medicines Infant care pdts, Perfumes, shopping products, cars
Odd versus even price
?
Prestige pricing
?
?
Low interst finance pricing
?
EMIs as reference
Distribution based pricing strategies
? ?
Channel price
?
Coke at fancy restaurant
Seats in a an aircraft, theatre, movie hall
Location Pricing
?
Responding To competitors price changes
No change in price or value offered ? No change in price, enhance offering, augmentation ? Change the price , keep offering same ? Change the price and also change offering and quality ? Introduce new line in new category.
?
You increase prices…
Incremental or radical ? ? Delayed quotation pricing
?
Construction projects, customised jewellery, dresses Floating interest rates
? ? ?
Escalator clauses
?
Unbundling
?
Charge for augmentation
Withdrawal of discounts
Without raising prices …
? ? ?
Reduce the quantum of offering
?
Maggi
Paperbacks, Lifebuoy refill packs
Substitute less expensive raw material
?
Use less expensive packaging material
?
Reduce the no. of sizes in product line ? Create new economy brands
?
doc_684329597.ppt