PARAMJIT SHARMA 1

PRICING

PARAMJIT SHARMA 2

PRICING

Price is the only Revenue….

….. Rest are costs

PARAMJIT SHARMA 3

PRICINGWHAT IS PRICE FOR AN OFFERING ?

RENT FOR A BUILDING

Tariff for phone

Airlines,Rly.,Bus, Cab….Fare

Express way…..Toll

Can it be price ?

PARAMJIT SHARMA 4

PRICING

Price…..Quality…..Segmentation

SEGMENT

ULTIMATEGOLD STD.LUXURYSPF. NEEDSMIDDLEEASE/CONV.ME TOOPRICE ALONE

AUTOMOBILES

Rolls RoyceMercedesAudiVolvoBuickFord EscortHyundaiKia

PARAMJIT SHARMA 5

PRICING

Price…..Quality…..Segmentation

SEGMENT

.LUXURYSPF. NEEDSMIDDLECONV.EECONOMYME TOOPRICE ALONE

AUTOMOBILES

MercedesHonda CivicOctaviaCheverolet OptraSantroAltoMaruti 800

PARAMJIT SHARMA 6

PRICING

Price …..Quality ….StrategiesPrice

Pro

du

ct Q

ual

ity

High Med low

H

M

L

1PremiumStrategy

2High value

strategy

3Super value

strategy

4Overcharging

strategy

5Medium

Value Stg.

6Good value

Strategy

7Rip off

Strategy

8False Econ.

Strategy

9EconomyStrategy

PARAMJIT SHARMA 7

PRICING

Price …..Quality ….StrategiesPrice

Pro

du

ct Q

ual

ity

High Med low

H

M

L

1PremiumStrategy

2High value

strategy

3Super value

strategy

4Overcharging

strategy

5Medium

Value Stg.

6Good value

Strategy

7Rip off

Strategy

8False Econ.

Strategy

9EconomyStrategy

PARAMJIT SHARMA 8

PRICING

Price …..Quality ….StrategiesPrice

Pro

du

ct Q

ual

ity

High Med low

H

M

L

1PremiumStrategy

2High value

strategy

3Super value

strategy

4Overcharging

strategy

5Medium

Value Stg.

6Good value

Strategy

7Rip off

Strategy

8False Econ.

Strategy

9EconomyStrategy

PARAMJIT SHARMA 9

PRICING

Price …..Quality ….StrategiesPrice

Pro

du

ct Q

ual

ity

High Med low

H

M

L

1PremiumStrategy

2High value

strategy

3Super value

strategy

4Overcharging

strategy

5Medium

Value Stg.

6Good value

Strategy

7Rip off

Strategy

8False Econ.

Strategy

9EconomyStrategy

PARAMJIT SHARMA 10

PRICING

Price = Value

MissingOpportunity

Un harvestedValue

L

M

H

M H

Perceived Delivered Value

Pri

ce

Paid

Value Received

PARAMJIT SHARMA 11

PRICING

Factors in setting Prices

5Selecting pricing

Method

6Selecting the final

Price

4Analysing competitorsCosts,prices & offers

3Estimatingcosts

1Selecting pricing

objective

2 Determining Demand

PARAMJIT SHARMA 12

PRICING1 SELECTING PRICING OBJECTIVE

SurvivalMaximizing Current ProfitMax. Market ShareMax. Market SkimmingMaximising Product QualityNon Profit Organizations.

PARAMJIT SHARMA 13

PRICING

2 DETERMINING DEMAND

Price SensitivityEstimating demand curvesPrice elasticity of demand

PARAMJIT SHARMA 14

PRICING

Price Sensitivity

Unique value effectSubstitute awareness effectDifficult comparison effectTotal expenditure effectEnd benefit effectShare cost effectSunk investment effectPrice quality effectInventory effect

PARAMJIT SHARMA 15

PRICINGMeasuring Demand-Price Relationship

Statistical Analysis

Conducting Price Experiments

Buyers Surveys

PARAMJIT SHARMA 16

PRICING

Price Elasticity of Demand

A Inelastic demand B Elastic demand

Qty. demanded per period

pri

ce

Pri

ce

Qty. demanded per period

3

2

1oo 105 50 150

PARAMJIT SHARMA 17

PRICING

3Estimating Costs

•Types & level of prod.•Accumulated Production•Differentiated mktg Offer•Target costing

PARAMJIT SHARMA 18

PRICING

Types of costs & level of Production

Qty. produced per day Qty. produced per day

A cost behaviour in a fixed size plant

B cost behaviour over diff. size plant

1000

Cost

per

un

it

Cost

per

un

it

1 2 3 4

PARAMJIT SHARMA 19

PRICING

Accumulated Production1 2 4 8

Cost

per

un

it

10

8

6

4

2

Accumulated Production

PARAMJIT SHARMA 20

PRICING

44ANALYSING COMPETITORS’ANALYSING COMPETITORS’

COSTS

PRICES &

OFFERS

PARAMJIT SHARMA 21

PRICING5 SELECTING PRICING METHODMETHODMARK UP PRICING

TARGET RETURN PRICING

PERCEIVED VALUE PRICINGVALUE PRICING

GOING RATE PRICING

SEALED BID PRICING

PARAMJIT SHARMA 22

PRICING

SELECTING A PRICING METHOD

THREE Cs Model

HIGHPRICE

No Possibledemand

Lowprice

No Possibleprofit

Ceiling Price Ortn.Price Floor Price

CostsComp priceSub,Price

CustomersAssessment ofUPF

PARAMJIT SHARMA 23

PRICINGMarkup Pricing

Unit Cost Rs20---------------------- =------ = Rs25( 1- Desired Return) 1-0.2

HIGH

SeasonalSlow MovingHigh StorageLife saving Drugs

PARAMJIT SHARMA 24

PRICINGTarget Return Pricing

Desired Return* Invested Cap---------------------------------- Unit Sales

Unit cost +

PARAMJIT SHARMA 25

PRICING

Perceived Value Pricing

Attributes

Quality Impurities10% Less than 1% 150

Delivery within 2 wks within 1wk 20

System supply ch’cal total system 80

Innovation less R& D High R & d 300

Service Regional Local 50

St. Offer PremiumOffer

Added Value

PARAMJIT SHARMA 26

PRICINGVALUE PRICING

EDLP Charging low forHigh quality

Wal-Mart

PARAMJIT SHARMA 27

PRICING

Save up to 80% on 2002's hottest toys!

                              

 

 

           

$38.00

 

Was: $69.77

 

              

 

 

           

$38.00

 

Was: $69.77

 

PARAMJIT SHARMA 28

PRICING

$26Was$32

$192Was$231

$41Was$61

PARAMJIT SHARMA 29

PRICINGSee the Big Games on a New TV                                                    

                                

 

The football playoffs are starting, so get ready with a flat-screen model, projection TV or an HDTV.

  Philips 50-inch Digital HDTV Monitor 50PP9202

 

           

$1,654.00

                                                   Was$1874

PARAMJIT SHARMA 30

PRICINGAuction Pricing

English Auctions

Sealed-BidAuctions

Dutch Auctions

PARAMJIT SHARMA 31

PRICING

Bid Profit Prob of getting bid

Expected

profit

9500 100 81% 81

10000 600 36 216

10500 1100 9% 99

11000 1600 1% 16

Effects on Different Bids

PARAMJIT SHARMA 32

PRICINGSELECTING THE FINAL PRICE

Psych

ological

1

M M Influence 2 3 Company

PP

4 Impact on others

PARAMJIT SHARMA 33

PRICINGAdapting the

Price

Geographical demand & costsMarket Segment RequirementsPurchase TimingsOrder levelsDelivery FrequencyService ContractsGuarantees………

PARAMJIT SHARMA 34

PRICING

AdaptingThe Price

Geographical

Discounts & Allowances

Promotional

Discriminatory

PARAMJIT SHARMA 35

PRICINGGeographical

Different or same price……How to get paid

•Barter•Compensation Deal•Buyback•offset

PARAMJIT SHARMA 36

PRICING

Price Discounts&

Allowances

Cash DiscountsQuantity DiscountsFunctional DiscountsSeasonal DiscountsAllowance Trade-in-Allowance Promotional Allowance

PARAMJIT SHARMA 37

PRICINGPromotional

Pricing

Loss LeaderSpecial EventsCash RebatesLow interest FinancingLonger Payment TermsWarranties & Service ContractsPsychological Discounting

PARAMJIT SHARMA 38

PRICINGDiscriminatory

Pricing

Customer Segment Pricing-MuseumsProduct Form Pricing-Cola PackingImage Pricing-PerfumesChannel Pricing-Rly Station..Theatre…5 starLocation Pricing-Balcony..Dress circleTime Pricing..seasons….day…night

PARAMJIT SHARMA 39

PRICINGProduct Line PricingOperational feature Pri.Captive Product PricingTwo part PricingBy Product PricingProduct Bundling Pricing

Product-MixPricing

PARAMJIT SHARMA 40

PRICING

INITIATING PRICECUTS

•Low quality trap•Fragile market share trap•Shallow pocket trap

PARAMJIT SHARMA 41

PRICING

INITIATING PRICE INCREASE

Over DemandInflation

PARAMJIT SHARMA 42

PRICING

Response To Over demandWithout Raising Price

Shrinking the productSubstitute materialsReducing product featuresRed. Product servicesUsing less Pac. Mat.Red. The No. of sizesCreating economy brand

PARAMJIT SHARMA 43

PRICING

COMPETITORSCUSTOMERS

ReactionsTo

Price Changes

PARAMJIT SHARMA 44

PRICING

Responding to Competitors

Price changes

Maintain price &Maintain price & add valueReduce priceIncrease price & Improve qualityLaunch a low price fighter line

PARAMJIT SHARMA 45

PRICING