Principles of Marketing
Presented to Mr. Gauhar Pirzada
By Group # 1
Name Roll no.
Iqra Nawaz 20
Sania Nouman 29
Zubair Habib 08
Asif Ali 11
Topics to be discussed
Chapter # 10 Chapter # 11
Understanding and Capturing Customer Pricing Strategies – Additional Considerations
Value
Pricing Strategies New Product Pricing Strategies
Cost as a function of Production Product Mix Pricing Strategies
Internal and External Considerations Price Adjustment Strategies
Affecting Price Decisions
Analyzing the Price – Demand Relationship
What Is Price ?
Price is the amount of money charged for a product or a service.
More broadly, it is the sum of all the values that a customer give up
to gain the benefits of goods and services. Price is the only element
in marketing mix that produces Revenue.
What is Price ?
Factors To Consider For Setting Prices
Customer Value-Based Pricing
Value-based pricing uses the buyers’ perceptions of value, not the sellers cost, as
the key to pricing. Price is considered before the marketing program is set.
Value-based pricing is customer driven
Good Value Pricing
Value Added Pricing
Customer Based Value Pricing
Good Value Pricing
Is the first customer value-based pricing strategy. It refers to offering the right
combination of quality and good service at a fair price – fair in terms of the relation
between price and delivered customer value.
E.g.
McDonalds
J.
Good Value Pricing
Value Added Pricing
Value-added pricing attaches value-added features and services to
differentiate offers, support higher prices, and build pricing power.
Orient AC with Wi-Fi
Mobilink
Value Added Pricing
Cost Based Pricing
Cost-based pricing involves setting prices based on the costs for producing,
distributing, and selling the product plus a fair rate of return for its effort and
risk.
Fixed Costs are the costs that do not vary with production or sales level
Rent
Executive salaries
Variable Costs are the costs that vary with the level of production
Packaging
Raw materials
Total Costs are the sum of the fixed and variable costs for any given level
of production
Cost Based Pricing
Cost as a function of Production
Cost Plus Pricing
Cost-plus pricing is a pricing strategy in which the selling price is
determined by adding a specific amount markup to a product's unit cost.
Cost as a function of Production
Break Even Pricing
Break even pricing is the practice of setting a price point at which a business will
earn zero profits on a sale. The intention is to use low prices as a tool to gain
market share and drive competitors from the marketplace.
Cost as a function of Production
Internal and External Considerations Affecting Price Decisions
Target Costing
Target costing is an approach to determine a product’s life-cycle cost which
should be sufficient to develop specified functionality and quality, while ensuring
its desired profit. It involves setting a target cost by subtracting a desired profit
margin from a competitive market price.
Target Costing
Analyzing the Price – Demand Relationship
Price elasticity of demand illustrates the response of demand to a change in price
Inelastic demand
occurs when demand hardly changes when there is a small change in
price
Elastic demand
occurs when demand changes greatly for a small change in price
Price elasticity of demand
New Product Pricing Strategies
Market – Skimming Pricing
New products set high initial prices to skim revenues layer by layer
from the market is called Market Skimming
E.g.
Perfume
Market – Penetration Pricing
Setting a low price for a new product in order to attract a large
number of buyers and a large market share
E.g.
Selitex Online
New Product Pricing Strategies
Product Mix Pricing Strategies
Product Line Pricing
Setting the price steps between various products in a product line based
on cost differences between the products, customer evaluations of
different features, and competitors’ prices.
E.g.
Service Shoe
Optional – Product Pricing
The pricing of optional or accessory products along with a main
products.
E.g.
Mobile Phones
Product Mix Pricing Strategies
By – Product Pricing
Setting a price for by-products to help offset the costs of disposing of them
and help make the main product’s price more competitive.
E.g.
Molasses is byproduct of refining sugar
Feathers are byproduct of poultry process
Captive – Product Pricing
Setting a price for products that must be used along with a main product.
E.g.
Gillette Razor & blades
Product Bundle Pricing
Combining several products and offering the bundle at a reduced price.
E.g.
Cable TV Channels Plan
McDonald’s value Meals
Product Mix Pricing Strategies
Price Adjustment Strategies
Companies must adjust their basic prices to account for differences in customers and situations.
Price Adjustment Strategies
Discount
A straight reduction in price on purchases during a stated period of time of
larger quantities.
E.g.
Specific Product Discount
Specific Category Discount
Bulk Discount
Allowance
Promotional money paid by manufacturers to retailers in return for an
agreement to feature the manufacturer’s products in some way.
E.g.
In-store displays
Psychological Pricing
Pricing that considers the psychology of prices and not simply the economics;
the price is used to say something about the product.
Reference Prices
Prices that buyers carry in their minds and refer to when they look at a given
product.
Promotional Pricing
Temporarily pricing products below the list price, and sometimes even below
cost, to increase short-run sales.
Price Adjustment Strategies
Segmented Pricing
Selling a product or service at two or more prices, where the difference in
price is not based on differences in costs.
Geographical Pricing
Setting prices for customers located in different parts of the country or world.
Price Adjustment Strategies
Dynamic Pricing
Adjusting prices continually to meet the characteristics and
needs of individual customers and situations.
THANK YOU
