MARKET PRICING AND ITS STRATEGIES

PRAVEEN KUMAR.S
3511120012

QUESTIONNAIRE
How do consumers process and evaluate prices?

How should a company set prices initially for products or services?

How should a company adapt prices to meet

varying circumstances and opportunities? When should a company initiate a price change? How should a company respond to a competitors price challenge?

PRICE
Price is the exchange value of a product or service, usually expressed in money.

Eg: Cello gel pen Rs 10 Here the product is pen and it can be exchanged by giving a sum of 10 rupees

Possible Consumer Reference Prices

Fair price- Potential market price Typical price-Average Last price paid Upper-bound priceGreater than or equal to Lower-bound price Competitor prices Expected future price Usual discounted price

Price Cues
A price cue is defined as any marketing tactic used to persuade customers that prices offer good value compared to competitors prices. E.g. : Bajaj Discover and Splendor Strategies: Odd number discount perceptions Even number value perceptions Ending prices with 0 or 5

When to Use Price Cues

Customers purchase item infrequently Customers are new Product designs vary over time Prices vary seasonally

Quality or sizes vary across stores

Steps in Setting Price

Select the price objective
Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price

Step 1: Selecting the Pricing Objective

Survival All FMCG Maximum current profit - Samsung Maximum market share - Nokia Maximum market skimming Sony high previously Product-quality leadership Apple iPod

Step 2: Determining Demand

Price sensitivity- consciousness of the customers to cost windows or range within which they make dealings Estimate demand curves
Price elasticity of demand- measure of

responsiveness of the quantity of a good or service demanded to changes in its price

Step 3: Estimating Costs

Types of costs
Accumulated production Activity-based cost accounting Target costing Cost reduction tool using

engineering , production, research and design over entire life cycle.

Cost Terms and Production

Fixed costs- Land

Variable costs- Raw materials

Total costs Average cost

Cost at different levels of production

STEP 4 : ANALYZING COMPETITORS COST PRICE AND OFFERS

Considering the nearest competitor price- Soft drinks Adding value to competitor price Inform the unique features to the customer and

offering for a value

E.g. : Hindu against Times of India

Step 5: Selecting a Pricing Method

Markup pricing extra price from cost
Target-return pricing Perceived-value pricing - Bargaining Value pricing Going-rate pricing- Based on competitor

price Auction-type pricing - Biding

Step 6: Selecting the Final Price

Impact of other marketing activities
Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties

Price-Adaptation Strategies
Geographical pricing
Discounts/allowances Promotional pricing Differentiated pricing

PRICE CHANGES- Decreasing Prices

Excess Plant Capacity
To popularize the brand

E.g. Deccan Chronicle Attract customers Rebuild the brand E.g. Hamam Minimum Target return Year end sale- Automobiles

Increasing Prices
Over demand

E.g. : Petrol in India Escalator clauses Government Tax Inflation due to natural calamities Reduction of discounts OFF sale

Brand Leader Responses to Competitive Price Cuts

Maintain price

Maintain price and add value

Reduce price Increase price and improve quality

Launch a low-price fighter line

THANK YOU

regards Deepak vallal