Bus 120 Essentials of Marketing

Tuesday & Thursday

BUS120
Names.
Anshul Saklani

Group# 1
Email.
anshulsaklani007@gmail.com

Number.
9878884489

Karanveer Singh Purba pkaranveer@gmail.com

8699319354

Tarun Arora

9888165007

Date submitted:
8th march 2016

taruna096@gmail.com

Date due:
8th march 2016

Pricing Decisions & Strategies

Marketing Mix : 4 Ps
Product
PRICE
Place
Promotion
Pricing is a very important strategic issue, as it is directly related to product positioning. Price
is the only marketing mix instrument that creates revenues. A companys global pricing
policy may make or break its overseas expansion efforts

Pricing and Business

How companies price a product or service ultimately depends on the demand and
supply for it
Three Cs that influence demand and supply:
1. Customers
2. Competitors
3. Costs

Steps to Price a Product (Not always same):

Develop Marketing Strategy
Market Analysis, Segmentation, Targeting and Positioning
Marketing Mix Decision
Define the Product, Distribution and Promotional strategies
Manage Demand curve

Demand Price relation

Cost
All fixed and variable cost is calculated
Environmental Factors
PEST
Set Pricing Objective
Profit maximization, Revenue maximization, Price stabilization
Determination of Price
Use one or combination of the above factors and make a pricing structure, give discounts etc.

Pricing Objectives
Current Profit Maximization
This stresses on Current profits, taking into account revenue and costs
Current Revenue Maximization
Stresses on increasing the Current revenue, and not profits. The motive is to maximize market
share and gain profits in long term.
Maximize Quantity
This stresses to maximize the number units sold to decrease long-term

costs as the

experience curve predicts

Maximize Profit Margin
Stresses to increase the profit margin per unit, as, number of unit being sold may be low.
Quality Leadership
Use price to signal high quality, to position the product as quality leaders.
Partial Cost Recovery

Organization which has other revenue sources may seek partial cost recovery.
Survival
In case of market decline or overcapacity, the emphasis may be on to the survival in the
market only and to cover the costs.
Status Quo
Price Stabilization to avoid price wars and maintain stable level of profits

Skim Pricing
Skimming is the strategy used to pursue the objective of Profit Margin Maximization.
Skimming is most Appropriate ..

Demand is expected to be relatively inelastic, ie. The customers targeted are not
highly price sensitive

Large cost savings are not expected at high volumes or it is difficult to predict the cost
savings that can be achieved at high volumes

The company does not have the resources to finance the last capital expenditure for
high volume production with initial low profit margins.

Penetration Pricing

Charging a low price in order to penetrate market quickly

Appropriate to saturate market prior to imitation by competitors

Penetration Pricing, most appropriate

Demand highly elastic, ie. Customers are price sensitive, the demand increases as the
price decreases.

Economies of scale

The product should be of mass appeal.

Major threat by competition.

Pricing Methods
Cost Plus Pricing
Set the price at the production cost adding a certain profit margin.
Target Return Pricing
Set the price to achieve a target return on investment.
Value Based Pricing
Base the price on the effective value to the customers which is relative to the alternative
product.
Psychological Pricing
Base the price on psychological factors of the consumer.
Price Discounts
Quantity Discounts
Offer to customers who purchase is large quantities.
Cumulative Quantity Discount
A discount that increase as the cumulative quantity increases.
Seasonal Discount
Based on the time when the purchase is made.
Cash Discount
Extended to customer who pay there bill before a specified date.
Trade Discount
A functional discount offered to channel members for performing there roles.
Promotional Discount A short term discounted price, offered to stimulate sale

Coca Colas Pricing

Coca-Cola is a leading player in the Indian beverage market with a 60 per cent share in
the carbonated soft drinks segment, 36 per cent share in fruit drinks segment and 33 per
cent share in the packaged water segment.
The company undertook the Affordability Strategy in 2002 by introducing the 200ml
RGB Bottle at US$ 0.1 to bring about the optimal affordable price value equation.

The lead-pack in the market was the 300ml at US$ 0.16 .

Each sub-brand of coca cola has different pricing strategy.

Their pricing strategy is based on the competitors pricing, Pepsi is the direct
competitor to coke. Beverage market is said to be a oligopoly market

Factors Coca Cola keep in mind while determining the pricing strategy
Price should be set according to the product demand of public.
Price should be that which gives the company maximum revenue.
Price should not be too low or too high than the price competitor is charging from
Their customers otherwise nobody will buy your product.
Price must be keeping the view of your target market.

References

http://www.knowthis.com/pricing-decisions
https://en.wikipedia.org/wiki/Pricing
https://www.google.co.in/webhp?sourceid=chromeinstant&ion=1&espv=2&ie=UTF-8#q=pricing%20decisions%20by%20a
%20company
http://www.yourarticlelibrary.com/product-pricing/9-factors-influencing-pricingdecisions-of-a-company/12953/
http://2012books.lardbucket.org/books/marketing-principles-v1.0/s18-02-factors-thataffect-pricing-de.html
http://archive.financialexpress.com/news/cocacola-raises-prices-for-all-cola-brandsin-india/1277168