G4: Developing a pricing

strategies and programs

By:
● Correa, Jeff C.
● Pesigan, Kim Joshua R.
● Ramos, Jo Mariebeth D.
● Sagario, Michelle M.
● Silva, Maureen Joy M.
 Outline
I. Consumer Psychology and Pricing
II. Steps in Setting Price
III. Learning what Price Adaptation is all about.
IV. Promotional Pricing Tactics
V. Differentiated Pricing
VI. Increase Prices
VII. Brand Leader Responses To Competitive
Price Cuts
 How do consumers process &
evaluate prices?

Process
Prices
Evaluate
Consumer Psychology and Pricing
❖ Reference Prices

❖ Price-Quality Inferences

❖ Price Endings

❖ Price Cues
Definition of Terms
❖ Consumer Psychology provides opportunities to examine issue such as what
factors are most important…
➢ When people decide to purchase a particular item
➢ How customers determine the value of service
➢ And whether or not marketing promotions can convince a reluctant consumer
to try a new product for the 1st time.

❖ PRICING is the process of determining what a company will receive

exchange for its products.
Reference Prices
They may also refer to:

Usual Discounted prices

Competitor’s price

Expected future prices

Reference prices

➢ are prices that buyers carry in their minds and refer to

when looking at a given product.
➢ is one of the component of psychological pricing -- sellers
consider the psychology of prices & not simply the
economics
➢ is a strategy in which a product is sold at a price just
below its main competing brand.
Price-Quality Inferences
❏ Use price as an indicator of price

❏ E.g. Waiting list, limited editions, etc.

Price Cues
● Strategies…...
❖ Ending with 9 or .99
❖ Discounts
❖ “Best deals”

● When to use...
❖ Customers purchase item infrequently
❖ Customers are new
❖ Products designs vary over time
❖ Prices vary seasonally
❖ Quality or sizes vary across stores
Setting the Price
1. Select the Price objective

2. Determine demand

3. Estimate costs

4. Analyze Competitor price mix

5. Selecting Pricing method

6. Select final price

 1.Selecting the Pricing Objective

Survival Maximum current Maximum market

Profit share

Maximum market skimming Product-quality leadership

2.Determine Demand

Price Sensitivity

Price Elasticity of
Demand

Estimating Demand
Curves
Estimating Demand Curves

● Statistical Analysis
○ Forecasting
● Price experiments
○ 25% off or 25% more
● Surveys
Price Elasticity of Demand

❖ Change in price affect consumer demand:

 3.Estimate Costs

Input

Fixed costs Variable costs

Output

● The sum of variable and fixed cost for any given level of
production is the total costs
● As product accumulates average cost decreases
Target Costing

Given product’s
Determine target price appeal and
and desired function competitor’s price

THEN: Target selling price = $ 9.90

Less profit margin = $ 3.40
Target cost = $ 6.50
4.Analyze Competitor Price Mix
● Identify nearest price competitors

● Take competitor’s features and prices into account

● Make decisions to charge more, the same or less than competitors

● Monitor competitors’ reaction to your pricing strategy

5.Different pricing methods can be used in varying
situations
Mark-up pricing

Target-return pricing

Perceived-value pricing

Value pricing

Going-rate pricing

Auction-type pricing
How they are used
● Markup Pricing is just adding a standard mark-up to the product’s cost.
● Target-return pricing is used by companies who need to make a fair return on
investment
● Perceived-Value pricing is a method used by a firm to set a price of a product
by considering what product image a customer carries in his mind and how
much he is willing to pay for it.
● Value based pricing is primarily set for consumers on how they perceive value
of product or service.
● Going-rate pricing is used for a product or service using the existing market
price as a basis. An example of this would aluminium and steel.
● Auction-type pricing is buying and selling goods or services by offering them
up for bid.
6.Select the Final Price
● Impact of other marketing activities

● Company pricing policies

● Gain-and-risk sharing pricing

● Impact of price on other parties

Profits Before and After a Price Increase
Price Adaptation Strategy
● Geographical Pricing

● Discount / Allowances

● Promotional Pricing

● Differentiated pricing
Geographical Pricing
Discount and Allowances

Prompt Payment Volume discount

discount Seasonal discount
Promotional Pricing

Special-event pricing

Loss-leader Pricing

Low-interest financing
Price-Adaptation Strategies

Countertrade
● Barter

● Compensation deal

● Buyback arrangement

● Offset
Increasing Prices
● Delayed quotation pricing

● Escalator clauses

● Unbundling

● Reduction of discounts
Brand Leader Responses To Competitive Price Cuts
1. Maintaining price

1. Maintaining price and adding value

1. Reduce price

1. Increasing price and improve quality

1. Launching a low-price fighter line

Reference
https://www.slideshare.net/ankit5886/chapter-14-developing-pricing-strategies-
and-programs-36407520

https://www.slideshare.net/alveenapappan/pricing-stratergies-ppt
Thank you for
Listening!
•Developing a pricing strategies and programs”-Marketing mix for companies comprises of 4 Ps Product, Price, Place and
Promotion. Price is directly related to bottom-line of any business. Profitability of product is required for future operation of the
company. Price strategy should communicate to the customer the value company is providing.
There is in-numerable price related challenges in the market for companies. Furthermore, with the advent of internet customer
awareness for pricing information has improved. Sites like Priceline and eBay are encouraging customer to name their price for
products as well as services.Pricing should adapt to factors like geographical location, market segment and economic conditions.
Companies should remain flexible towards pricing policy and change as per market dynamics. Companies should also not react
blindly to price change by competition rather should focus on analyzing the underlying motives
•Psychology -the scientific study of the human mind and its functions, especially those affecting behavior in a given context.
synonyms: study of the mind, science of the min

•Reference -use of a source of information in order to ascertain something.

•Psychological pricing-Deciding on the amount to price an item depends on more than tangible factors, such as labor and the cost
of materials. It also greatly depends on psychology. Gauging a target market’s emotional responses to an item is known as
psychological pricing. What is psychological pricing? Simply, it is a slick way to increase sales without significantly reducing prices;
several ways exist for you to price your goods or services in this manner.
•Reference prices-A reference price is the price that a purchaser announces that it is willing to pay for a good or service. It is used
by high-volume purchasers to inform suppliers. ... Reference pricing requires sufficient competition. Otherwise, consumers have no
choice about providers, who in turn face less pricing pressure.
•Definition: Reference price is also known as competitive pricing, because here the product is sold just below the price of a
competitor's product. Reference price is the cost at which a manufacturer or a store owner sells a particular product, giving a hefty
discount compared to its previously advertised price.
•Reference -use of a source of information in order to ascertain something.
•Psychological pricing-Deciding on the amount to price an item depends on more than tangible factors,
such as labor and the cost of materials. It also greatly depends on psychology. Gauging a target market’s
emotional responses to an item is known as psychological pricing. What is psychological pricing?
Simply, it is a slick way to increase sales without significantly reducing prices; several ways exist for you
to price your goods or services in this manner.
•Reference prices-A reference price is the price that a purchaser announces that it is willing to pay for a
good or service. It is used by high-volume purchasers to inform suppliers. ... Reference pricing requires
sufficient competition. Otherwise, consumers have no choice about providers, who in turn face less
pricing pressure.
•Definition: Reference price is also known as competitive pricing, because here the product is sold just
below the price of a competitor's product. Reference price is the cost at which a manufacturer or a store
owner sells a particular product, giving a hefty discount compared to its previously advertised price.
•Price-quality inferences-Consumer Perceptions of Price, Quality, and Value: A Means-End. Model and
Synthesis of Evidence. Evidence from past research and insights from an exploratory investigation are
combined in a conceptual model that defines and relates price, perceived quality, and perceived value.
•Price endings-A price's ending consists of one or all of the rightmost digits of a price and can be
manipulated more or less independently of the level of the price. For example, the prices, $29.95 and
$30.00, have different endings, but are at virtually the same level.
•Price cues-A price cue is defined as any marketing tactic used to persuade customers that prices offer
good value compared to competitors' prices, past prices or future prices. In this paper, we review the
academic literature that documents the effectiveness of different types of prices cues.
•Price adaptation strategy -Pricing strategy is a huge element of an overall marketing strategy. In some
cases, companies establish a set price for a good or service that is constant across the business.
However, some companies use adaptation strategies, which means different customers pay different
prices in certain circumstances.
•Geographical pricing-Geographical pricing, in marketing, is the practice of modifying a basic list price
based on the geographical location of the buyer. It is intended to reflect the costs of shipping to different
locations. ... It can be either the buyer or seller that arranges for the transportation
•Discount/allowances-Discounts and Allowances are reductions to the selling price of goods or services.
They can be applied anywhere in the distribution channel between the manufacturer, middlemen (such
as distributors, wholesalers, or retailers), and retail customer
•Promotional pricing-Price promotions or promotional pricing is the sales promotion technique which
involves reducing the price of a product or services in short term to attract more customers & increase
the sales volume.
•Differentiated pricing -Differential pricing is the strategy of selling the same product to different customers at
different prices. Consider the pricing behavior at an auction. Everyone has the same information and bids on
the same item.
•Price adaptation strategy- countertrade -The only time when price setting is not a problem is when you are a
“price-taker” and have to set prices at the going rate, or else sell nothing at all. This normally only occurs under
near-perfect market conditions, where products are almost identical. More usually, pricing decisions are among
the most difficult that a business has to make.

•Barter-Barter – The direct exchange of goods, with no money and no