26-11-2019

Pricing Strategy

Price taker
Vs.
Price maker

Session - 16

TASK
India continues to remain the largest
contributor to cancer deaths at 2.2 million
every year, of the global figure of 8.8
million, mainly due to 70 per cent of cancer
patients consulting the doctor at the
terminal (4th)stage, say doctors.

• EGFR Case
• Price setting & Price getting

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PRICE SETTING VS GETTING

Price orientation Vs. realisation

Understanding Pricing
• How companies price
– Small companies: boss
– Large companies: division/product line
managers
• How companies should price
– Understanding of consumer pricing
psychology
– a systematic approach to setting, adapting,
and changing prices

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Adapting the Price

• Promotional pricing:

• Loss-leader pricing • Low-interest financing

• Special event pricing • Longer payment terms
• Special customer • Warranties/service
pricing contracts
• Cash rebates • Psychological
discounting

Adapting the Price

• Price discrimination
Customer-
Product-form
segment
pricing
pricing

Image
Time pricing pricing

Location Channel
pricing pricing

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Adapting the Price

• Price discounts and allowances

Consumer Psychology and Pricing

Reference prices

Price-quality inferences

Price endings

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RESPONDING TO PRICE WAR

• Cut Price (Go beyond competition)
• Cut price (Match competition)
• Hold price (don’t respond)
• Reposition Pricing
• Increase Price
• Others ?

JIO & DOW STORY

• What is your views about Jio & How will you
respond to Jio’s strategies? How to fight a
price war?

• Story of Dow!

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Setting the Price

Step 1: Selecting the Pricing

Objective

Maximum
Survival
current profit

Other Maximum
objectives market share

Maximum
Product-quality
market
leadership
skimming

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Step 5: Selecting a Pricing

Method
• Three major considerations
– Costs = price floor
– Competitors’ prices =
orienting point
– Customers’ assessment of
unique features = price
ceiling

Step 5: Selecting a Pricing Method

• Markup pricing
– Add a standard markup to the product’s cost

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Step 5: Selecting a Pricing Method

• Target-return pricing
– Price that yields its target rate of return on
investment

Step 5: Selecting a Pricing Method

• Value pricing
• EDLP
– High-low pricing
• Going-rate pricing

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7 PRICE-SETTING METHODS
• Markup pricing,
• Target-return pricing,
• Perceived-value pricing,
• Value pricing,
• EDLP,
• Going-rate pricing, and
• Auction-type pricing.

Step 5: Selecting a Pricing Method

• Auction-type pricing

English (ascending)

Dutch (descending)

Sealed-bid

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Adapting the Price

• Geographical pricing
– Barter
– Compensation deal
– Buyback arrangement
– Offset

PRICING IN DIGITAL WORLD

• Your views please

✓ Get instant vendor price comparisons

✓ Check prices at the point of purchase
✓ Name your price and have it met
✓ Get products free
✓ Monitor customer behavior & tailor offers
✓ Give customers access to special prices
✓ Negotiate prices online or even in person

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New Pricing Trends

• A changing pricing environment

– Sharing economy

– Bartering

– Renting

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