Pricing

Price determines the amount of money

needed to acquire a product.
It means the expression of value or
utility in terms of money.
Pricing is an important and core
element of marketing mix.
It is the only component which
generates revenue to the organisation.

Role of Pricing
a. Its used as a sales promotion
technique eg. Discounts, incentives to
dealers.
b. Its a tool that determines the
profitability of firm.
c. Effective tool to face competition
d. Acts as a demand regulator and
control demand for the products of
the company.

Objectives of Pricing

Survival
Profit objective
Prevent new entry
Image differentiation
Early cash recovery
Sales objective increase in market
share, increase sales.
Market skimming
Social responsibility

Factors affecting pricing

Cost
Product
Product Life cycle
Image of firm
Objective of firm
Promotional activities
Credit policy
Competition
Demand
Consumer
Government condition
Economic condition
Channel of distribution

Pricing Process
Set pricing objectives

Set initial price

New Product Pricing Strategy

Probe pricing strategy

Standard pricing strategy
Follow the leader strategy
Differential pricing strategy
Trial pricing
One price strategy
Flexible price strategy
Skimming pricing strategy
Penetrating pricing strategy

Skimming Pricing Strategy

Meaning: a high premium price is
charged when a product is launched
in the market.
Objective: this strategy aims at high
profit margin in the early stages of
the product introduction.
Suitability: to those products that
offer important benefits to the target
audience.

Continuation
Target audience doesnt mind to pay high
prices
Advantages of skimming pricing strategy
It enables higher profits per unit sold during
initial stages of the product
It helps to recover development and launch
costs within a short period of time.
It brings prestige status to the user, as only
high class of the society can afford to pay
high prices.

Penetrating Pricing Strategy

Meaning: The pricing strategy of low price
in the early stages of product introduction
is called as penetration pricing strategy.
Objectives: The main objective is to
capture a large share of the market in the
early stages of product introduction in the
market.
Suitability: This strategy is suitable to those
newly introduced products, which can
generate a large volume of business.

Continuation
Advantages:
It helps to capture large share of
market.
It discourages potential competitors
to enter the market due to low
profits.
A firm can enjoy economies of large
scale production and distribution.

Skimming Pricing Strategy V/s Penetrating Pricing Strategy

Meaning
Purpose: To make high
profit within a short time
of product introduction.
Target: limited market
segment.
Promotional Expenditure:
heavy promotional
expenditure per unit.
Economies of scale: its
not enjoyed.

Meaning
Purpose: To enter a
market which is
competitive and capture
it.
Targeting the mass.
Promotional
Expenditure:
promotional expenditure
per product is very less.
Economies of scale: its
enjoyed here.

Discount policies

Discounts are reduction in sales price

offered by the seller to the buyer.
Its a tool used to market a product to
the target audience.
Types of discount are:
Cash discounts
Quantity discounts
Seasonal discounts
Functional discounts