Pricing Strategies
4/28/2014 ITFT College, Chandigarh 1
Price Determination: An Overview
4/28/2014 2ITFT College, Chandigarh
Demand Curves
P
Q
D
Quantity
Price
4/28/2014 3ITFT College, Chandigarh
Price Elasticity of Demand
% Change in quantity demanded
Price Elasticity of Demand =
% Change in price
• Elastic Demand
•...
Costs, Volume, and Profits
• Fixed Costs (FC)
• Variable Costs (VC)
• Total Costs (TC)
• Marginal Cost MC)
• Marginal Reve...
Price Determination Methods
• Markup Pricing
Price = Unit Cost + Markup
Price = Unit Cost/(1-k)*
*k = desired % markup
or
...
Price Determination Methods
Break-Even Analysis
Total Revenue
Total Cost
Fixed Cost
BEP
$
Quantity (units)
Loss
Profit
4/2...
Price Determination Methods
• Target-Return Pricing
(Desired return X Invested capital)
Price = Unit Cost +
Expected Unit ...
Price Determination Methods
• Target-Cost Pricing
1. Define market segments for new product.
2. Product is designed based ...
Price Determination Methods
• Income-Based Pricing
• Real Estate
• Marketable Securities
• Businesses
4/28/2014 10ITFT Col...
Prices and Customer Value
4/28/2014 11ITFT College, Chandigarh
Pricing Strategies
Differential Pricing
Second-market discounting
Periodic discounting
Competitive Pricing
Penetration pri...
B2B Pricing Strategies
• New Product Pricing
• Price Skimming
• Penetration Pricing
• Experience Curve
Pricing
• Competiti...
Adapting Prices: Decreases and Increases
• Price Reduction
Traps:
1. Low-quality trap
2. Fragile market
share trap
3. Shal...
Adapting Prices: Reacting to
Competitive Price Changes
• Temporary retail price reductions substantially
increase store tr...
Adapting Prices: Price Discounts and
Allowances
• Cash Discounts
• Trade Sales Promotion Allowances
• Quantity Discounts
4...
Adapting Prices: Geographical Pricing
FOB Origin Pricing
Uniform Delivered
Price
Zone Pricing
Freight Absorption
Pricing
4...
Competitive Bidding and Negotiated
Pricing
• Sealed-bid Pricing
• Reverse Auctions
4/28/2014 18ITFT College, Chandigarh
Pricing Services
Price is influenced by the
nature of the service involved.
The larger the market share,
the higher the pr...
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Pricing stratigies

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


Transcripts - Pricing stratigies

  • 1. Pricing Strategies 4/28/2014 ITFT College, Chandigarh 1
  • 2. Price Determination: An Overview 4/28/2014 2ITFT College, Chandigarh
  • 3. Demand Curves P Q D Quantity Price 4/28/2014 3ITFT College, Chandigarh
  • 4. Price Elasticity of Demand % Change in quantity demanded Price Elasticity of Demand = % Change in price • Elastic Demand • Inelastic Demand • Cross Elasticity of Demand 4/28/2014 4ITFT College, Chandigarh
  • 5. Costs, Volume, and Profits • Fixed Costs (FC) • Variable Costs (VC) • Total Costs (TC) • Marginal Cost MC) • Marginal Revenue (MR) • Total Revenue (TR) TC = (VC X Q) + FC Total Revenue = Price X Quantity Profits = TR - TC 4/28/2014 5ITFT College, Chandigarh
  • 6. Price Determination Methods • Markup Pricing Price = Unit Cost + Markup Price = Unit Cost/(1-k)* *k = desired % markup or 4/28/2014 6ITFT College, Chandigarh
  • 7. Price Determination Methods Break-Even Analysis Total Revenue Total Cost Fixed Cost BEP $ Quantity (units) Loss Profit 4/28/2014 7ITFT College, Chandigarh
  • 8. Price Determination Methods • Target-Return Pricing (Desired return X Invested capital) Price = Unit Cost + Expected Unit Sales 4/28/2014 8ITFT College, Chandigarh
  • 9. Price Determination Methods • Target-Cost Pricing 1. Define market segments for new product. 2. Product is designed based on competitive advantages and disadvantages. 3. Position product in context of overall company strategy. 4. Fine-tune product based on customer’s preferences, perceived value and willingness to pay. 5. Estimate various price-responsiveness with simulations. 6. Estimate target costs between optimal price and desired margin. 4/28/2014 9ITFT College, Chandigarh
  • 10. Price Determination Methods • Income-Based Pricing • Real Estate • Marketable Securities • Businesses 4/28/2014 10ITFT College, Chandigarh
  • 11. Prices and Customer Value 4/28/2014 11ITFT College, Chandigarh
  • 12. Pricing Strategies Differential Pricing Second-market discounting Periodic discounting Competitive Pricing Penetration pricing Price signaling Going-rate pricing Psychological Pricing Odd-even pricing Customary pricing One-sided claims Product Line Pricing Bundling Premium pricing Partitional pricing 4/28/2014 12ITFT College, Chandigarh
  • 13. B2B Pricing Strategies • New Product Pricing • Price Skimming • Penetration Pricing • Experience Curve Pricing • Competitive Pricing • Leader Pricing • Parity Pricing • Low-Price Supplier • Price Line Pricing • Complementary Product Pricing • Price Bundling • Customer Value Pricing • Cost-based Pricing • Cost-plus Pricing 4/28/2014 13ITFT College, Chandigarh
  • 14. Adapting Prices: Decreases and Increases • Price Reduction Traps: 1. Low-quality trap 2. Fragile market share trap 3. Shallow pockets trap • Acceptable Price Range: • Prices the buyer is willing to pay. 4/28/2014 14ITFT College, Chandigarh
  • 15. Adapting Prices: Reacting to Competitive Price Changes • Temporary retail price reductions substantially increase store traffic and sales. • Large-market-share brands are hurt less by price changes from smaller competitors. • Frequent price dealing lowers consumers’ reference prices, which may hurt brand equity. • Price changes for high-quality brands affect weaker brands and private-label brands disproportionately. 4/28/2014 15ITFT College, Chandigarh
  • 16. Adapting Prices: Price Discounts and Allowances • Cash Discounts • Trade Sales Promotion Allowances • Quantity Discounts 4/28/2014 16ITFT College, Chandigarh
  • 17. Adapting Prices: Geographical Pricing FOB Origin Pricing Uniform Delivered Price Zone Pricing Freight Absorption Pricing 4/28/2014 17ITFT College, Chandigarh
  • 18. Competitive Bidding and Negotiated Pricing • Sealed-bid Pricing • Reverse Auctions 4/28/2014 18ITFT College, Chandigarh
  • 19. Pricing Services Price is influenced by the nature of the service involved. The larger the market share, the higher the price that can be charged. Managing off-peak demand makes pricing services difficult. Bundling services into a single package and price is a common strategy. 4/28/2014 19ITFT College, Chandigarh

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