PRICING DECISION PROCEDURE FOR PRICE DETERMINATION KINDS OF PRICING MARKET SEGMENTATION

1. MARKETING
MANAGEMENT
PRICING
Ms.C.Dharshanaa

2. PRICING DECISION
 OBJECTIVES
 FACTORS AFFECTING PRICING DECSION
01
PROCEDURE FOR PRICE DETERMINATION
02
KINDS OF PRICING
03
MARKET SEGMENTATION
 CRITERIA FOR SEGMENTATION
 METHODS OF SEGMENTATION
04
Ms.C.Dharshanaa

3. Ms.C.Dharshanaa

4. PRICING OBJECTIVE
RESOURCE MOBILIZATION
Sufficient resources and optimum
utilization of resources
MARKET SHARE
Target share of the market and
expected sales volume
TO MEET OR PREVENT COMPETITION
Pricing of other firms in the market has to be
considered while fixing the price.
STABILIZE PRICE
When price often changes
there arises, no confidence on
the product.
PROFIT MAXIMIZATION
Business is run with an idea of
making profit
CUSTOMERS ABILITY TO PAY
Prices charged differ from person to
person
PRICING FOR TARGET RETURN
Capital in a business is invested by a
business man and then he/she
calculates the rate of return on
investment
Ms.C.Dharshanaa

5. PRICING FOR TARGET RETURN
Business needs capital (ie) investment in the
shape of various assets and working capital
Business man calculates rate of return on
investment and then the price is fixed accordingly
SELLER ORIENTED POLICY
This objective of pricing is called as pricing for profit
They charge over and above the price, they purchased which s
enough to meet operational cost and a desired profit.
Firms wants to secure percentage of return on
their investment on sales.
Ms.C.Dharshanaa

6.  The target share of the market and expected volume of sales.
 Pricing objective is adopted to improve the market share
towards the product.
 A good market share is a indication of progress.
 The firm may lower the price than their competitors to capture
the market share.
M A R K E T
S H A R E
Position in the market
Ms.C.Dharshanaa

7. TO MEET OR PREVENT COMPETITION
 While fixing the price, the price of similar
products, produced by other firms, will have to
be considered.
 One has to see the price of rival products and fix
the price.
 The low price policy discourages the
competitors.
Ms.C.Dharshanaa

8. PROFIT MAXIMIZATION
LOW PRICING POLICY
Produce goods at low price
UNHEALTHY IMAGE
The profit maximization will develop unhealthy
image
HIGH PRICING POLICY
Fixing high price of the product maximizes the
price and increases the profit of the product
PROFIT
Business with all kind is run with an idea 0f
earning profit at the maximum.
PROFIT MAXIMIZATION
Ms.C.Dharshanaa

9. STABILISE PRICE
Prevent price fluctuation.
Prevent price war among competitors.
Price often changes arises no change among the competitors.
Depression – prices are not allowed to fall below a certain level.
Boom - prices are not allowed to raise above a certain level.
THE GOAL IS TO LIVE AND LET
LIVE
Ms.C.Dharshanaa

10. CUSTOMERS
ABILITY TO
PAY
PRICES ARE CHARGED FROM
PERSON TO PERSON ACCORDING
TO HIS CAPACITY TO PAY
Example: Doctors charge fees
according to the capacity of the
person
Ms.C.Dharshanaa

11. RESOURCE MOBILIZATION
 Products are priced in such way that sufficient
resources are made available to the firm’s
expansion, developmental investment.
 Marketers are interested in getting back the amount
as early as possible.
 Optimum utilization of resources brings down the pric
of the product.
Ms.C.Dharshanaa

12. Ms.C.Dharshanaa

13. Internal
Factor
External
Factor
Pricing
Decision
Ms.C.Dharshanaa

14. INTERNAL
FACTOR
PRODUCT
DIFFERENTIATON
OBJECTIVES OF THE
FIRM
COST OF THE
PRODUCT
MARKETING MIX
ORGANIZATIONAL FACTOR
Ms.C.Dharshanaa

15. ORGANIZATIONAL FACTOR
A
B
PRICING decision occurs in 2 levels in the organization
Combination of production + Marketing specialist involves in choosing
the price.
Overall pricing strategy is dealt by top executives
They determine the basic range that a product falls – market segments
The actual mechanics of work are dealt at lower level.
Focuses on individual product strategy.
Ms.C.Dharshanaa

16. MARKETING MIX
A
B
PRICING is considered as important element in marketing mix by
marketing experts.
Some firms may raise price as strategy to build high prestige product
line Eg: Apple Phone
A shift in price has an impact on other 3 P’s
Product, Place and Promotion
Firm my use price reduction as a marketing technique
Eg: Oppo and Vivo
Ms.C.Dharshanaa

17. PRODUCT DIFFERENTIATION
A
B
PRICING of the product also depends upon the character of the product
Customers pay more for the product which is of new style, fashion,
better package etc.
To attract customers different characteristics are added to the product.
Quality, size, color, attractive package, alternative uses etc.
Ms.C.Dharshanaa

18. COST OF THE PRODUCT
A
B
COST AND PRICE of the product are closely related
Ultimately the product reaches the people, and their capacity to pay will
fix the cost.
Most important factor is the cost of production
Firm may try to decide if the prices are realistic, considering current
demand and competition in the market.
Ms.C.Dharshanaa

19. OBJECTIVES OF THE FIRM
A
B
FIRM may pursue a variety of value oriented objective
These were the internal factors of pricing decision
Pricing policy should be established only after proper consideration of
the objectives of the firm.
Maximizing sales revenue, maximizing market share, maximizing customer volume,
minimizing customer volume, maintaining an image, maintaining stable price etc.
Ms.C.Dharshanaa

20. EXTERNAL FACTOR
ECONOMIC
CONDITION
GOVERNMENT
COMPETITION
BUYERS
SUPPLIERS
DEMAND
Ms.C.Dharshanaa

21. External Factor
Demand Competition Suppliers
Economic
condition Buyers
Demand is affected by
number and size of
competitors,
prospective buyers,
their capacity and
willingness to pay
A firm can fix
the price equal
to or lower than
that of the
competitors
Suppliers of raw
materials and other
goods.
Eg: Chocolate Industry.
If sugarcane rate goes
up chocolate rate
increases
Recession- The price
are reduced.
Boom period – price
are increased.
Various
consumers have
an influence in the
pricing decision
Government
Price control
by the
government
Ms.C.Dharshanaa

22. Ms.C.Dharshanaa

23. Steps followed to determine the price
1
2
4
6
3
5
Determine demand for
the product
Establish expected
share of market
Consider company’s
marketing policy
Anticipate and analyse
the competitive
reaction
Select pricing strategy
Set the price
Ms.C.Dharshanaa

24. • Each price that a company charge will lead to a different
level of demand.
• There is a relation between the price of the product and the
demand.
• Higher the price, Lower the demand
• 2 steps in demand estimation:
A) Determine if there is a price which the market expects.
B) Estimate the sales volume at different price.
• Comparison of the price of rival product is a good guide in
pricing the product.
Ms.C.Dharshanaa

25. Anticipate and analyse the competitive
reaction
Competition may arise from
1. Similar product
2. Close substitute
3. unrelated products
Establish expected share of market
• Low priced product may capture
larger share of the market.
• High priced product may
capture small share of the
market.
Ms.C.Dharshanaa

26. Selecting pricing strategy
a) Skimming pricing
b) Penetration pricing
Consider company’s marketing
policies
The price of the product is
influenced by the nature of
product’s durability –
perishability or non-
perishability.
Ms.C.Dharshanaa

27. SELECT A SPECIFIC PRICE FOR THE PRODUCT BY THE
PRODUCER
Ms.C.Dharshanaa

28. Ms.C.Dharshanaa

29. TYPES OF PRICING
Ms.C.Dharshanaa

30. PSYCHOLOGICAL PRICING
People prefer high
priced products,
considered to be of a
high quality
In retail shop Odd
Pricing is used.
The prices are set
at odd amounts
Ms.C.Dharshanaa

31. By custom or convention, certain products are
sold almost at the same price by different
marketers.
Example: Milk, butter, coffee powder, soft
drinks, etc.
Customers are familiar with the rates and
market conditions.
Firm changes the price adopting new
packaging.
CUSTOMARY PRICING
MANUFACTURERS CANNOT
CONTROL THE PRICE
Ms.C.Dharshanaa

32. Skimming pricing
It refers to the practice of setting a very high price for a product, when it is
introduced into the market for the first time and to reduce the same gradually as
competitors enter the market.
Thus, a high initial price offers scope for price reduction when necessary. It has
been given the name ‘skimming pricing’ because it helps to skim (take) the cream
of the market that is not really sensitive to price and is mainly quality conscious.
Ms.C.Dharshanaa

33. Penetration pricing
• Setting a low initial price for the product is what is penetration pricing. It has
been given such a name because it enables the product to penetrate
(pierce or go into) the market to find a place.
In the case of penetration pricing, although, profits are sacrificed in the initial
years, profits are expected to accrue in the long-run.
Ms.C.Dharshanaa

34. Geographic Pricing
FOB PRICING
ZONE PRICING
BASE POINT PRICING
• The distance between the seller and buyer is geographical pricing.
• Cost of transportation is important pricing factor in India.
Majority of the production centers are located in Bombay, Delhi,
Calcutta and Madras.
Ms.C.Dharshanaa

35. Administered Pricing
• The price is determined by a marketer based mainly on personal
consideration is known as administered pricing.
• Factors like cost, demand and competitions are ignored.
• Price tends to be uniform.
Ms.C.Dharshanaa

36. Dual pricing refers to two sets of prices for the
same commodity controlled prices for weaker
sections and higher open market prices for the
others .
PRODUCT IS SOLD TO GOVERNMENT BY
THE PRODUCER IN A COMPULSORY
MANNER AND THE REMAINING IS SOLD IN
THE OPEN MARKET.
Ms.C.Dharshanaa

37. MARK UP PRICING
This method is adopted by wholesaler and retailer.
It refers to the price arrived at by a retailer by adding a certain
percentage (towards his margin of profit) to the manufacturer’s price. It
is only at this price that he sells the goods to the consumers.
Ms.C.Dharshanaa

38. In this case, the price, once determined, remains unchanged for a fairly longer
period of time.
Prices should not be too close to each other or too far from each other.
PRICE LINING
Ms.C.Dharshanaa

39. Ms.C.Dharshanaa

40. Big firms or government call for competitive bids when
they want to purchase certain goods. The offer is made
quoting the price. The lowest bidder gets the work.
COMPETITIVE BIDDING
Ms.C.Dharshanaa

41. • The price fixed by a marketer who has no
competition or substitute in the market is
known as monopoly pricing.
• Monopoly price will maximize the profit as there
is no pricing problem.
MONOPOLY PRICING
Ms.C.Dharshanaa

42. OLIGOPOLISTIC PRICING
PRESENCE OF FEW LARGE SELLERS, WHO
COMPETE FOR LARGER MARKET SHARE.
None has control over the price it charges.
Any firm may take initiatives in fixing the price of the
product.
Eg: HUL, P&G, ITC & Godrej
Ms.C.Dharshanaa

43. THANK YOU
THAT YOU HAVE UNDERSTOOD THE CONCEPT OF PRODUCT PRICING
Ms.C.Dharshanaa