marketing mix...pricee

8/8/2019 Marketing Mix...Pricee

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UPLOADEDBY

BILAL [email protected]

INFORMATION 4 EVERYONE


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MARKETING MIX: PRICE


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CONTENTSTOBEDISCUSSED

Defining price

Price is what you pay for what you get

Pricing objectives

Price Determination Methods (Value and CostBased Pricing)

Other internal and external factors influencingprices

Pricing strategies like new product pricingstrategies, product mix pricing strategies and priceadjustment strategies.


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PRICEDEFINED

The amount of money charged for a product orservice or the sum of all the values that customersgive up in order to gain the benefits of having orusing the product or service. i.e exchange of value

Historically, the price is the major factor affectingbuyers choice. In recent decades, non-price factorshave also gained importance. However, price

remains of the important factors determining firmsprofitability and market share.

Price is the only revenue generating elementamong the four Ps, other being the cost centers.


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PRICEISWHATYOUPAYFORWHATYOUGET

Tuition---education

Interest---use of money

Rent---use of living house or equipment for a spanof time

Fare---taxi or bus ride

Toll---travel on some highways

Fee---services of a lawyer or physician

Dues---membership in a union or a club

Commission---sales persons services

Salary---services of an executive or a white collarworker

Wage---services of a blue collar worker


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Methods of price determination

There are usually two ways to determine the prices.

One is value-based pricing which further involves

good-value pricing and value-added pricing.

Other is Cost-based pricing which further involvescost-plus pricing and break even or target profit

pricing.


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WHY 150,000 $ BENTLEY GT CARISNOTEXPENSIVERATHERAPUREVALUE?

Good Value is not always same as Low prices


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Value based Pricing

Good- value pricing

Offering just the rightcombination of quality andgood service at a fair (low)

price.

E.g Mcdonalds value meals

Every day low pricing

(EDLP)

High-low pricing

Low-cost leadership

Value-added pricing

Attaching value addedfeatures and services todifferentiate a companys

offer and to support/justifyhigher prices.

Loyal customers are lessprice sensitive.

Well developed brands canuse this.

Differentiation strategy


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Cost Based Pricing

Setting prices based on the cost for producing,distributing and selling the product plus a fair rate ofreturn for effort and risk.

Cost plus pricing and break-even or target profitpricing discussed in the next slide are the twomethods used in cost based pricing.


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Cost based Pricing

Cost-plus pricing

Adding a standard mark-upon the cost of the product or

service.

First you need to forecastthe unit sales and unit cost(F.C and V.C) and then

adding a mark-up

Mark-up= unit cost

(1-desired markup)

Break-even or target profitpricing

Setting prices to break-evenon the cost of making and

marketing a product orservice OR setting prices tomake a target profit.

General motors use this

pricing seeking target profitof 15-20 % on theirautomobiles.


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Other internal and external factorsinfluencing the prices

Marketing strategy, objectives and other marketingmix elements

Different types of market competitions-monopolistic, oligopolistic, pure competition etc

Competitors strategies and prices

Economic conditions- boom or recession

Government

Resellers


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Pricing strategies New product pricing strategies

Market Skimming pricing

Market Penetration pricing

o Product Mix pricing strategies

Product Line pricing

Optional product pricing

Captive product pricingBy-product pricing

Product bundle pricing

o Price Adjustment Strategies

Discount and Allowance Pricing

Segmented PricingPsychological Pricing

Promotional Pricing

Geographical and International Pricing

Dynamic Pricing


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NEW PRODUCT DEVELOPMENT STRATEGIES

Market Skimming Pricing is setting an initial highprice for a new product to skim maximum revenueslayer by layer from the segments willing to payhigher price; the company will make fewer but more

profitable sales E.g sony bravia and other sony products

Market Penetration Pricing is setting a low initialprice for a new product in order to attract a large

number of buyers and a larger market share.

E.g Dell, Wall Mart etc


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PRODUCT MIX PRICINGSTRATEGIES

Product Line Pricing is setting the price betweenvarious products in a product line based on costdifferences between the products, customerevaluation of different features and competitors

prices. E.g Levis shirts and jeans 501,601 series

Optional Product Pricing is the pricing of optionalor accessory products along with the main

products.

E.g IPOD- armband carrying case, externalspeaker, travel chargers

Car- Alloy Rims, CD changer


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PRODUCTMIXPRICINGSTRATEGIES (CONTD.)

Captive product pricing is setting a price forproducts that must be used along with a mainproduct such as blades for a razor, films for acamera, cartridge for a printer, video games DVDs

for Sony Play station or Xbox. By-Product Pricing is setting a price for by-

products in order to make main products pricemore competitive

Product Bundle Pricing is combining several

products and offering the bundle at a reduced price. E.g Kfc Zinger, Coke, French friescombo price

PTCLs bundle of phone connection and internet at1999 Rs


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PRICEADJUSTMENTSTRATEGIES

Discount and Allowance Pricing

Discounts:

a straight reduction in list price onpurchases during a stated period of time.

Cash Discounts: a price reduction to buyers whopay their bills promptly (2/10, net 30)

Quantity Discounts for purchasing in largervolumes

Functional or trade discounts for retailers,wholesalers etc

Seasonal Discounts for off-season discounts suchas by hotels, garments etc


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DISCOUNTANDALLOWANCEPRICING(CONTD.)

Allowances

Promotional money paid by manufacturersto retailers in return for an agreement to feature themanufacturers products in some way.

E.g Promotional Allowances- payments or pricereductions to reward dealers for participating inadvertising and sales support programs

E.g Nokia-MZ


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PRICEADJUSTMENTSTRATEGIES (CONTD.)

Segmented Pricing is selling a product at two ormore prices where the difference in prices is notbased on differences in costs.

E.g Museums may charge lower to students and toold citizens or locations of seats in theatre or time-pricing used by airlines etc

Psychological Pricing is a pricing approach thatconsiders the psychology of prices not simply the

economics; the price is used to say somethingabout the product.

E.g many consumers use to judge quality throughprices 100 $ Perfume may just carry 3 $ worth

sent in its bottle.


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Promotional Pricing is temporarily pricingproducts below the list price and sometimes evenbelow cost to increase short-run sales.

E.g supermarkets and departmental stores often

run sales promotion where they price few productsvery low to attract customers to the store in thehope that they will buy other items on normal orhigher mark-ups

Dynamic Pricing is adjusting prices continually tomeet the characteristics and needs of individualcustomers and situations. E.g Dell in shortage of 40gb hard disks, airlines may set the price for anindividual customer very low because they have a

seat vacant before take-off


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Geographical and International Pricing is settingprices for customers located in different parts ofcountry or world.

Should our price be same throughout thecountry or world or should it be different?

Factors to formulate an answer about the abovequestion are something like cost of distribution, costof promotion, economic conditions, development ofroads and infrastructure, ordering size etc

marketing mix...pricee

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