pricing stategy class slides

8/9/2019 Pricing Stategy Class Slides

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Pricing strategyPricing strategy


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Multiple product pricingMultiple product pricing

In reality there are different modelsIn reality there are different models,styles and sizes of products of the,styles and sizes of products of the

same company.same company.

Thus a company producingThus a company producing

differentiated products would have samedifferentiated products would have sameMC cost curve but different revenueMC cost curve but different revenue

curves.curves.

Also each product has different demandAlso each product has different demand

curvescurves

Clemens have given the solution to theClemens have given the solution to the

problem of fixing the prices of differentproblem of fixing the prices of different

products sold by the same firm.products sold by the same firm.


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Pricing strategiesPricing strategies

Introduction stageIntroduction stage

Pricing of totally a new product would dependPricing of totally a new product would dependon the availability of its close substitutes.on the availability of its close substitutes.

. Advertising is crucial at this stage,. Advertising is crucial at this stage,No close substituteNo close substitute

1.Skimmining price policy1.Skimmining price policy--skim the cream ieskim the cream iemaximum prices initially. also heavymaximum prices initially. also heavypromotional expenditure.promotional expenditure.

Where substituted are availableWhere substituted are available2. Penetration price policy. first low prices2. Penetration price policy. first low prices

and then prices are raised gradually.and then prices are raised gradually.


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Pricing in growth stage.Pricing in growth stage.

The growth phase occurs when a productThe growth phase occurs when a producthas survived its introduction and ishas survived its introduction and isbeginning to be noticed in the marketplace.beginning to be noticed in the marketplace.

This is the boom time for any product.This is the boom time for any product.

Production increases, leading to lower unitProduction increases, leading to lower unitcosts. Sales momentum buildscosts. Sales momentum builds

Competition grows as awareness of theCompetition grows as awareness of theproduct builds. Minor changes are made asproduct builds. Minor changes are made asmore feedback is gathered or as newmore feedback is gathered or as newmarkets are targeted. The goal for anymarkets are targeted. The goal for anycompany is to stay in this phase as long ascompany is to stay in this phase as long aspossible.possible.

Sales, discounts, and advertising all playSales, discounts, and advertising all playan important role in that processan important role in that process


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Three types of pricing duringThree types of pricing during

growth stagegrowth stage

1.1. Pricing below the market pricePricing below the market price..

Firms wants to expand its product mix. goodFirms wants to expand its product mix. goodfor the new brands.for the new brands.

Also good for the innovative products.Also good for the innovative products.

2.Pricing at the market price.when theseller is the price taker and not theleader.

3.Pricing above the existing market price.

Incase of presitigious goods,where thecustomers prefer to shop in poshareas .also called veblen effect.


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Maturity stage.Maturity stage.

At the maturity stage, sales growth hasAt the maturity stage, sales growth hasstarted to slow and is approaching thestarted to slow and is approaching thepoint where the inevitable decline will beginpoint where the inevitable decline will begin

more competitors have stepped forwardmore competitors have stepped forward

Can lead to price wars.Can lead to price wars.

Seller prefers to reduce its cost ofSeller prefers to reduce its cost ofproduction to gain maximum profit.production to gain maximum profit.

Product improvement and cosmeticProduct improvement and cosmetic

changes are required to stay in the market.changes are required to stay in the market.


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Decline stageDecline stage

This occurs when the product peaksThis occurs when the product peaks

in the maturity stage and then beginsin the maturity stage and then begins

a downward slide in sales.a downward slide in sales.

Eventually, revenues will drop to theEventually, revenues will drop to thepoint where it is no longerpoint where it is no longer

economicallyeconomically feasiblefeasible to continueto continue

making the product. Investment ismaking the product. Investment is

minimized. The product can simplyminimized. The product can simplybe discontinued, or it can be sold tobe discontinued, or it can be sold to

another company.another company.


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Peak load pricingPeak load pricing

Concerns the nonConcerns the non--storable goodsstorable goodslike electricity, telephones services.like electricity, telephones services.

Consumption of these types ofConsumption of these types ofgoods are different during the noghtgoods are different during the noghtand the day times.and the day times.

Electricity consumption is highestElectricity consumption is highestduring the business hrs and alsoduring the business hrs and alsoduring the festival times.during the festival times.

Therefore a double pricing system isTherefore a double pricing system isadopted to charge higher duringadopted to charge higher duringpeak time and less during offpeak time and less during off--peakpeaksystem.system.


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pricing stategy class slides

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