factor for pricing

8/4/2019 Factor for Pricing

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PRICE AFFECTINGDECISION BY HAMMADAFZAL


2/18

Factors Affecting Price

Decisions

Internal FactorsMarketing ObjectivesMarketing Mix StrategyCostsOrganizationalconsiderations

Internal FactorsMarketing ObjectivesMarketing Mix StrategyCostsOrganizationalconsiderations

External Factors

Nature of the marketand demand

CompetitionOther environmental

factors (economy,resellers, government)

External Factors

Nature of the marketand demand

CompetitionOther environmental

factors (economy,resellers, government)

PricingDecisions

PricingDecisions


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Marketing

Objectives

SurvivalLow Prices to Cover Variable Costs andSome Fixed Costs to Stay in Business.

Current Profit MaximizationChoose the Price that Produces the

Maximum Current Profit, Etc.

Market Share Leadership

Low as Possible Prices to Becomethe Market Share Leader.

Product Quality LeadershipHigh Prices to Cover Higher

Performance Quality and R & D.

Internal Factors Affecting Pricing

Decisions: Marketing Objectives


4/18

Price

Product Design

Distribution

Promotion

NonpricePositions

Internal Factors Affecting Pricing

Decisions: Marketing Mix


5/18

Market andDemand

Competitors Costs,Prices, and Offers

Other External FactorsEconomic ConditionsReseller Needs

Government ActionsSocial Concerns

External Factors Affecting

Pricing Decisions

Competitor Costs

This ad by LCI International accuses its competitors of using

unfair practices in pricing, hiding fees incurred by rounding up.

Hidden fees, defined ascramming by the

FCC, are the number

one source of billing

complaints amonglong-distance

customers.

Why is LCI focusing on

this practice?


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Pure CompetitionPure CompetitionMany Buyers and Sellers

Who Have LittleEffect on the Price

Pure CompetitionPure CompetitionMany Buyers and Sellers

Who Have LittleEffect on the Price

MonopolisticMonopolisticCompetitionCompetition

Many Buyers and SellersWho Trade Over a

Range of Prices

MonopolisticMonopolisticCompetitionCompetition

Many Buyers and SellersWho Trade Over a

Range of Prices

Pricing in Different Types of Markets

Market and Demand Factors

Affecting Pricing Decisions

OligopolisticOligopolisticCompetitionCompetition

Few Sellers Who AreSensitive to Each Others

Pricing/ Marketing

Strategies

OligopolisticOligopolisticCompetitionCompetition

Few Sellers Who AreSensitive to Each Others

Pricing/ Marketing

Strategies

Pure MonopolyPure MonopolySingle Seller

Pure MonopolyPure MonopolySingle Seller


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Major Considerations in Setting

Price (Fig. 10.5)


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Cost-Based Pricing

Certainty AboutCosts

Pricing isSimplified

Price CompetitionIs Minimized

UnepectedSituational actors

Attitudesof

Others

Ethical

IgnoresCurrent

Demand &Competition

Cost-PlusPricing is anApproach That

Adds a

StandardMarkup to theCost of theProduct.

SimplestPricingMethod

Much airer to

Buyers & Sellers


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Product

Cost

Price

Value

Customers

Customer

Value

Price

Cost

Product

Cost-Based Pricing Value-Based Pricing

Cost-Based Versus Value-Based

Pricing


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Setting Prices

Sealed-BidCompany Sets Prices Based on

What They Think CompetitorsWill Charge.

Going-RateCompany Sets Prices Based on What

Competitors Are Charging.

??

Competition-Based Pricing


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New Product Pricing Strategies

Market Skimming

Setting a High Pricefor a New Product toSkim MaximumRevenues from theTarget Market.

Results in Fewer, ButMore Profitable Sales.

Market Skimming

Setting a High Pricefor a New Product toSkim MaximumRevenues from theTarget Market.

Results in Fewer, ButMore Profitable Sales.

Use Under TheseConditions:

Products Quality andImage Must Support ItsHigher Price.Costs Cant be so Highthat They Cancel theAdvantage of ChargingMore.Competitors Shouldnt beAble to Enter MarketEasily and Undercut theHigh Price.


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New Product Pricing Strategies

Market Penetration

Setting a Low Price for aNew Product in Order toPenetrate the MarketQuickly and Deeply.

Attract a Large Numberof Buyers and Win aLarger Market Share.

Market Penetration

Setting a Low Price for aNew Product in Order toPenetrate the MarketQuickly and Deeply.

Attract a Large Numberof Buyers and Win aLarger Market Share.

Use Under TheseConditions:

Market Must be HighlyPrice-Sensitive so a LowPrice Produces MoreMarket Growth.Production/ DistributionCosts Must Fall as SalesVolume Increases.Must Keep OutCompetition & MaintainIts Low Price Position orBenefits May Only be

Temporary.


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Product Mix-Pricing

Strategies:Product Line PricingInvolves setting pricesteps between various

products in a productline based on:

Cost differencesbetween products,

Customer evaluations ofdifferent features, and

competitors prices.


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Product Mix- Pricing Strategies

Optional-ProductPricing optional or

accessory productssold with the mainproduct. i.e camera bag.

Captive-ProductPricing products thatmust be used with themain product. i.e. film.


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Product Mix- Pricing

Strategies

By-Product

Pricing low-valueby-products to getrid of them andmake the mainproducts pricemore competitive.

i.e. sawdust, ZooDoo

Product-Bundling

Combining severalproducts andoffering thebundle at areduced price.

i.e. theater seasontickets.


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Discount and Allowance Pricing

Cash Discount Seasonal Discount

Quantity Discount Trade-In Allowance

Functional Discount Promotional Allowance

Adjusting Basic Price to Reward Customers

For Certain Responses


17/18

Psychological Pricing

Considers the psychology ofprices and not simply the

economics.Customers use price lesswhen they can judge qualityof a product.

Price becomes an importantquality signal whencustomers cant judgequality; price is used to saysomething about a product.


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Special-Event PricingCash Rebates

Low-Interest Financing

Longer Warranties

Free Merchandise

Discounts

Loss Leaders Temporarily Pricing

Products Below ListPrice to IncreaseShort-Term Sales

Through:

Promotional Pricing

factor for pricing

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