Pricing Strategies
Mrs. Jayashree Vispute
Penetration Pricing
 Price set to ‘penetrate the market’
 ‘Low’ price to secure high volumes
 Typical in mass market pr...
Market Skimming
 High price, Low volumes
 Skim the profit from the market
 Suitable for products that have short life c...
Value Pricing
 Price set in accordance
with customer
perceptions about the
value of the
product/service
 Examples includ...
Loss Leader
 Goods/services deliberately sold below cost to
encourage sales elsewhere
 Typical in supermarkets, e.g. at ...
Psychological Pricing
 Used to play on consumer perceptions
 Classic example – Rs.999 instead of Rs.1000!
 Links with v...
Going Rate (Price Leadership)
 In case of price leader, rivals have difficulty in competing
on price – too high and they ...
Tender Pricing
 Many contracts awarded on a tender basis
 Firm (or firms) submit their price for carrying out the
work
...
Price Discrimination
 Charging a different price
for the same good/service
in different markets
 Requires each market to...
Destroyer/Predatory Pricing
 Deliberate price cutting or offer of ‘free
gifts/products’ to force rivals (normally smaller...
Contribution Pricing
 Contribution = Selling Price – Variable (direct costs)
 Prices set to ensure coverage of variable ...
Market Skimming Market Penetration
>Setting a High
Price for a New
Product to
Maximize
Revenues from the
Target Market.
>R...
Pricing strategies
 Premium pricing
 Uses a high price, but gives a good product/service exchange
e.g. Concorde, The Rit...
 Price skimming
 where prices are high - usually during introduction
 e.g new albums or films on release
 ultimately p...
 Optional product-pricing
 e.g. optional extras - BMW famously under-equipped
 Captive product pricing
 products that ...
 Geographical pricing
 different prices for customers in different parts of the
world
 e.g.Include shipping costs, or p...
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Pricing strategies feb

Published on: Mar 4, 2016
Published in: Business      Economy & Finance      
Source: www.slideshare.net


Transcripts - Pricing strategies feb

  • 1. Pricing Strategies Mrs. Jayashree Vispute
  • 2. Penetration Pricing  Price set to ‘penetrate the market’  ‘Low’ price to secure high volumes  Typical in mass market products – chocolate bars, food stuffs, household goods, etc.  Suitable for products with long anticipated life cycles  May be useful if launching into a new market  Results in a Larger Market Share
  • 3. Market Skimming  High price, Low volumes  Skim the profit from the market  Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out) Results in Fewer, More Profitable Sales. Eg. Playstation, jewellery, digital technology, new DVDs, etc.
  • 4. Value Pricing  Price set in accordance with customer perceptions about the value of the product/service  Examples include status products/exclusive products Companies may be able to set prices according to perceived value.
  • 5. Loss Leader  Goods/services deliberately sold below cost to encourage sales elsewhere  Typical in supermarkets, e.g. at Diwali, selling scented soap at Rs. 13 in the hope that people will be attracted to the store and buy other things  Purchases of other items more than covers ‘loss’ on item sold
  • 6. Psychological Pricing  Used to play on consumer perceptions  Classic example – Rs.999 instead of Rs.1000!  Links with value pricing – high value goods priced according to what consumers THINK should be the price
  • 7. Going Rate (Price Leadership)  In case of price leader, rivals have difficulty in competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market  May follow pricing leads of rivals especially where those rivals have a clear dominance of market share  Where competition is limited, ‘going rate’ pricing may be applicable – banks, petrol, supermarket products, electrical goods – find very similar prices in all outlets
  • 8. Tender Pricing  Many contracts awarded on a tender basis  Firm (or firms) submit their price for carrying out the work  Purchaser then chooses which represents best value  Mostly done in secret
  • 9. Price Discrimination  Charging a different price for the same good/service in different markets  Requires each market to be impenetrable  Requires different price elasticity of demand in each market Prices for rail travel differ for the same journey at different times of the day
  • 10. Destroyer/Predatory Pricing  Deliberate price cutting or offer of ‘free gifts/products’ to force rivals (normally smaller and weaker) out of business or prevent new entrants  Anti-competitive and illegal if it can be proved
  • 11. Contribution Pricing  Contribution = Selling Price – Variable (direct costs)  Prices set to ensure coverage of variable costs and a ‘contribution’ to the fixed costs  Similar in principle to marginal cost pricing  Break-even analysis might be useful in such circumstances
  • 12. Market Skimming Market Penetration >Setting a High Price for a New Product to Maximize Revenues from the Target Market. >Results in Fewer, More Profitable Sales. > Setting a Low Price for a New Product in Order to Attract a Large Number of Buyers. >Results in a Larger Market Share.
  • 13. Pricing strategies  Premium pricing  Uses a high price, but gives a good product/service exchange e.g. Concorde, The Ritz Hotel  Penetration pricing  offers low price to gain market share - then increases price  e.g. France Telecom - to attract new corporate clients (or Telewest cable)  Economy pricing  placed at ‘no frills’, low price  e.g. Soups, spaghetti, beans - ‘economy’ brands
  • 14.  Price skimming  where prices are high - usually during introduction  e.g new albums or films on release  ultimately prices will reduce to the ‘parity’  Psychological pricing  to get a customer to respond on an emotional, rather than rational basis  .e.g 99 not 100 ‘price point perspective  Product line pricing  rationale of a product range  e.g. DairyMilk 20, three-pack 60, chotu-size 2  Pricing variations  ‘off-peak’ pricing, early booking discounts,etc  e.g offering a ‘cash back’ incentive for expensive goods
  • 15.  Optional product-pricing  e.g. optional extras - BMW famously under-equipped  Captive product pricing  products that complement others  e.g Gillette razors (low price) and blades (high price)  Product-bundle pricing  sellers combine several products at the same price  e.g software, books, CDs.  Promotional pricing  BOGOF e.g. toothpaste, soups, etc
  • 16.  Geographical pricing  different prices for customers in different parts of the world  e.g.Include shipping costs, or place on PLC  Value pricing  usually during difficult economic conditions  e.g. Value menus at McDonalds

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