By: Imad Feneir

Overview #Definition of price.

#Importance of Price. #Pricing objectives.

#Factors Affecting Pricing . #Pricing strategies (Methods ).

#Articles about pricing. #Samsung versus Apple.

#Conclusion

Definition of price *The amount of money charged for

a product or service. *The sum of all the values that

consumers exchange for the benefits of having or using the product or

service.

Definition of price *A value that will purchase a

limited quantity, weight, or other measure of a good or service.

*The amount of money needed to persuade someone to do something.

Importance of Price* Choosing the right pricing strategy strengthens the chance of achieving turnover and profit in line with company objectives.

Importance of Price* Often price creates a first impression of the quality of the product/service and other value based judgements come later.

Importance of Price *Controls in size of demand.

Pricing objectives*Partial cost recovery: A company

that has sources of income other than from the sale of products may decide to implement this pricing objective.

*Profit margin maximization: The company want to maximize the per-unit

profit margin of a product.

Pricing objectives*Revenue maximization: The company

want to maximize revenue from the sale of products.

*Quantity maximization: Want to maximize the number of items sold .

Pricing objectives*Status quo: Want to keep your

product prices in line with the same or similar products offered by your

competitors. *Survival: Needs to price at a level

that will just allow it to stay in business and cover essential costs .

Factors Affecting Pricing (i ) Internal Factors:

1 .Cost: The firm should consider the cost involved in producing the product.

2 .The predetermined objectives: the marketer should consider the objectives of the firm.

Factors Affecting Pricing

3 .Image of the firm: The price of the product may also be determined on the basis of the image of the firm in the market.

4 .Product life cycle: The stage at which the product is in its life cycle in the market.

Factors Affecting Pricing

5 .Credit period offered: Longer the credit period, higher the price and shorter the credit period, lower the price of the product.

6 .Promotional activity: If the firm incurs heavy advertising and sales promotion costs, the pricing of the product should cover the

cost .

Factors Affecting Pricing

(ii ) External Factors:1 .Competition: the firm needs to study the

degree of competition in the market.

2 .Consumers: The marketer should consider various consumer factors (the price sensitivity of the buyer, purchasing power, and so on).

Factors Affecting Pricing

3 .Government control: Government rules and regulation must be considered while fixing the prices.

4 .Channel intermediaries: The marketer must consider a number of channel intermediaries and their expectations.

Factors Affecting Pricing

5 .Economic conditions: The marketer may also have to consider the economic condition prevailing in the market while fixing

the prices .

Pricing strategies (Methods )

#Competitive pricing: Pricing your product(s) based on the prices your competitors have on the same product(s).

#Penetration pricing: Used to gain entry into a new market and to get market share.

Pricing strategies (Methods )

#Premium pricing: Employed when the product you are selling is unique and of very high quality.

#Skim pricing: Used on products that are new and have few, direct competitors when first entering the market.

Pricing strategies (Methods )

#Product bundle pricing: Used to group several items together for sale.

#Cost based pricing: To calculate product

cost you need to include the costs of production, promotion and distribution and add the profit level you want.

Pricing strategies (Methods ) #Customer based pricing: Business owners

should be know "at which price make their customers thinks their product offers good

value?”#Psychological Pricing: used to play on

consumer perceptions.

Articles about pricing *A Review of the Effect of Pricing Strategies

on the Purchase of Consumer GoodsDudu, O.F. and Agwu, M. E. (2014)

Purpose: This study examined the effect of pricing strategies on the purchase of consumer goods .

Methodology: The research intended through review of the literature to answer questions on the extent to which competitor's price affects purchase of products and how customers perceive the value-based pricing concept of firms.

Findings: 1- Price is the most flexible element in

marketing strategy .2- The pricing strategy used for a product says a

lot about the product affects on the purchase decision process of the consumer.

3- Most organizations, use more than one pricing strategy which makes it is even more flexible.

4- Price is important to both the buyer and seller.

*Optimal Uniform Pricing Strategy of a Service Firm When Facing Two Classes of

Customers.Wenhui Z., Xiuli C. and Xiting G. (2014).

Purpose: This study addresses the optimal uniform pricing problem of a service firm using a

queuing system with two classes of customers .Methodology: They consider a firm that provides a service to a market. There are two classes of potential customer. Different system parameters can lead to completely different pricing strategy for the firm.

Findings: 1- The potential pool of customers plays a central role

in the firm’s optimal decision.2- The firm cannot or is not allowed to set

discriminatory prices.3- The potential market structure plays a key role for

the firm.4- The firm has to be fully investigated and understood

before the firm makes the pricing decision.5- the optimal selling price of a firm is not always

monotone in the potential market size or the arrival rates of potential customers.

*Pricing strategies with reference effects in competitive industries .

Brian C. and Srini K. (2014)

Purpose: This paper examines the effect of reference prices on companies operating within

competitive industries .Methodology: This paper considers the optimal pricing strategy for firms in competitive industries subject to reference price effects and the advent of competition leaves pricing

strategies qualitatively unchanged .

Findings: 1- Firms that use comparative data to

evaluate pricing managers’ achievements may reach to incorrect conclusions .

2- Companies that price optimally to utilize reference prices may earn disproportionately “small” rewards for their actions.

3- More long-term focused firms may generate “lower” profit than their competition.

Samsung versus Apple #Apple:

-Premium and Skimming pricing strategy. -Primary objective, sell a great phone and

provide a great experience. -Offer a small number of products.

-Give priority to profits over market share. -Create a halo effect that makes people

starve for new Apple product.

Samsung versus Apple #Samsung:

-Skimming strategy for the main product (Galaxy S) to gain the upper

hand over their competitors . -Competitive strategy when other

competitors launch a smartphone. -Penetration strategy for other

products from smartphones. -Permanent diversity of products to

control the market .

conclusion -To choosing a pricing objective and a related

strategy requires you to carefully consider your business and financial goals .

-You want to select objectives and strategies that will position your product and business for

success . -You can to change your objectives and employ

different strategies in the future as your business grows or changes.