Pricing Strategy Chapter: 11 Lec: 8b

Price Adjustment Strategies Segmented Pricing Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. customer-segment pricing e.g. Museums, students and elderly people pay less price for the ticket

Price Adjustment Strategies Segmented Pricing -product form pricing e.g. the bigger the size of the mineral water bottle the price will not change like that Small Rs. 10, Medium…… - Location pricing e.g. Universities charge higher price for out of country students (international students)

Price Adjustment Strategies Segmented pricing Time Pricing e.g. Cinema charges higher tickets on weekends - Airlines ticket vary within minutes

Price Adjustment Strategies Psychological Pricing A pricing approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product - higher price, higher quality Reference pricing Prices that buyers carry in their minds and refer to when they look at given product

Price Adjustment Strategies Psychological Pricing e.g. -Buy one get one free -Buy one get other at half price -Sale -Rs. 99

Price Adjustment Strategies

Price Adjustment Strategies Promotional Pricing Temporarily pricing products below the list price, and sometimes even below cost. To increase short-run sales -Adverse effects Customers will wait for the sale Competitor will follow

Price Adjustment Strategies

Price Adjustment Strategies Geographical Pricing Setting prices for customers located in different parts of the country or world - FOB (Free on Board) A geographical pricing strategy in which goods are placed free on board a carrier, the customer pays the freight from the factory to the destination Factory------customer freight-----Destination

Price Adjustment Strategies Uniform delivered pricing A geographical pricing strategy in which the company charges the same price plus freight to all customers regardless of the destination Factory--same freight for everyone---destination Zone pricing A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price Factory—freight according to zone--destination

Price Adjustment Strategies Dynamic Pricing Adjusting prices continually to meet the characteristics and needs of individual customers and situations - change in the fixed price policy International Pricing different prices in different countries e.g. McDonalds Gucci

Price Adjustment Strategies

Price Changes Initiating Price changes Buyer and competitor reactions should be anticipated - Initiating Price Cuts - Excess Capacity - Falling demand due to competition - ‘low’ price as promotion e.g. “Big Bazar”…India’s Republic Day as “sab say sast din” e.g. CNG Stations

Price Changes Initiating Price Increases - a successful price increase can increase profits - make low visible price increase - justify your price increase - avoid direct price increase e.g. start charging for food during an air travel - extra luggage!, pillow, blanket

Price Changes Buyer Reaction to price changes - Increase (quality is increased or they are charging too much) - Cut (Quality is decreased, getting rid of excess things, concerned about us) e.g. Tiffany Competitors reaction to price changes

Price Changes