1. Price Mix

2. Price Sum of all the values that consumers exchange for the benefits of having / using the product – Monetary – Energy – Time – Psychic

3. Factors Determining Pricing Internal & External

4. Factors Determining Pricing Marketing Objective – Survival – Profit Maximisation – Share Maximisation – Quality Leadership – Blocking of Competition

5. Factors Determining Pricing Marketing Mix Strategy – Coordinated with other mix elements – Positioning: Price vs. Non-Price – Product: Image / Quality Perception – Distribution: Push vs. Pull

6. Factors Determining Pricing Costs – Price that covers costs & gives a healthy ROI – Fixed Cost + Variable Cost = Total Cost – Cost Reduction vs. Profit Reduction

7. Factors Determining Pricing Market Demand – Sets the upper limit of prices – Type of Market Pure Competition (Uniform Product) Monopolistic Competition (Differentiated Product) Oligopolistic Competition (Most price sensitive) Pure Monopoly – Price-Demand Relationship

8. Factors Determining Pricing Consumer Perception of Value – Buyer Orientation – Value Maximisation

9. Factors Determining Pricing Price Sensitivity – Elastic vs. Inelastic – Unique Products vs. Substitutable Products – Share of Wallet

10. Factors Determining Pricing Competitors Cost & Price – Consumer Consideration Set – Benchmarking – Competitive Position

11. Methods of Price Determination Cost Based Value Based Competition Based

12. Cost Based Pricing Cost Plus Pricing – Cost + Standard Markup – Ignores Competition & Demand – Fair & Certain – Ideal for customised products: Construction

13. Value Based Pricing Starting point is customer Price is determined on the basis of value associated Keeping profit margin a cost is determined On the basis of the cost a product is designed Commonly used be restaurants

14. Competition Based Pricing Going rate pricing Product Comparison – Parity: Match Pricing – Superior: Higher Pricing – Inferior: Lower Pricing

15. Strategies for Pricing of New Products Market Skimming Market Penetration

16. Market-Skimming Pricing Skim revenues layer by layer Start by selling at high prices to innovators Conditions – Quality & Image must justify the price – Sizeable demand at that price – Additional cost of low volume should not offset the price premium – Competition should not replicate at lower prices

17. Market-Penetration Pricing Opposite of skimming Set a low price to penetrate and have high MS Volumes offset value gains Upward revision post loyalty Conditions – Market is price sensitive – Scale must result in cost reduction – Competition should not better the price

18. Strategies for Pricing of Product Mix

19. Product Line Pricing Different prices for different products in the line on the basis of – Cost Differences – Customer Value Assessment – Competitors Prices Cover the entire range of customers Must be well distinguished from each other

20. Optional Product Pricing Base Product at lowest pricing Variations of the base product with different add-ons for customer benefit Base Product: Promotion Product Variants: Sales Product Most commonly used in automobiles

21. Captive Product Pricing Main Product + Captive Product Sell main product on low price Make high margins on captive products – Nintendo Console + Games – Canon Printer + Catridge – Multiplex Ticket + Refreshment

22. Bundle Pricing Combining various products and offering the bundle at a price which is less than the sum of the individual MRPs of the products Helps sell more of a brand to the customer – McDonald’s Value Meals – Hotel Package

23. Price Adjustment Strategies Discounts

24. Discount Pricing Adjustment in basic pricing to reward / induce the customer to buy – Higher Volume of a Product – Off-Season – Loyal Buyer Types of discounts – Cash – Quantity – Seasonal

25. Allowance Pricing Price reduction for turning in an old item when buying a new one Induce customers to replace products earlier than required Most commonly used in industries such as – – Automobiles – Durables

26. Segmented Pricing Product is sold at two or more different prices even though the cost is the same – Customer Segment Pricing(Rail Travel) – Location Pricing (Cinema Hall) – Time Pricing (Season, Month, Day, Hour)

27. Psychological Pricing Prices work psychologically and say something about the product Not just about economics Work using reference prices Suggest product difference / value – 299 vs. 300

28. Promotional Pricing Temporary drop in prices to create buying excitement and urgency – Loss Leadership (Diapers) – Special-Event (Diwali) Overuse can result in – Deal Syndrome – Dilution of Brand Equity – Price Wars

29. Price Changes

30. Price Cuts Underutilised capacity Falling market share Gain share from competitor Guard for consumer reaction Predict the competitive reaction

31. Price Increases Rising input costs Overdemand & shortage Methods – Absolute Increase – Effective Increase Reasons should be communicated Guard for consumer reaction Predict the competitive reaction

32. Responding to Competitive Price Changes Is the category price sensitive Actions – Match price – Increase perceived quality – Improve product and increase price – Launch a fighter brand