PRICING

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Synonyms for Price

Rent
Tuition Fee

Special assessment
Bribe Dues

Fare
Rate Toll

Salary
Commission Wage

Premium
Honorarium

Tax

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Common Pricing Mistakes

Determine costs and take traditional industry margins
Failure to revise price to capitalize on market changes Setting price independently of the rest of the

marketing mix Failure to vary price by product item, market segment, distribution channels, and purchase occasion

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Steps in Setting Price

Select the price objective
Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final price

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Pricing Objectives
Survival Profit (satisfactory level, % or rupees, Shoebuy.com) Return on investment (Specific ROI, Trial and error,

GM) Market Share (relation to competition, Higher profits, Air Bus [40% discount]) Cash flow (Recover cash quickly, anticipation of short production cycle)

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 Status Quo (Maintain position by maintaining market

share, matching price) Product-quality

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Pricing Method
Markup pricing (add a standard mark up, construction

companies, lawyers and accountants) Target-return pricing (target rate of return) Perceived-value pricing (according to customers perceived value of product performance, channel deliverables, warranty, quality, reputation etc)

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 Value pricing (low price high quality offering,

reengineering, Wal-Mart, Big Bazaar, Bata, Peter England) Going-rate pricing (Competitors prices, Oligopolistic market) Auction-type pricing Demand based pricing (hotels, air lines, Telephone companies, Theatres)

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Issues in selecting the Final Price

Impact of other marketing activities
Company pricing policies (Air tickets, savings bank

A/c) Gain-and-risk sharing pricing (soft ware) Impact of price on other parties (sales force, distributors)

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Price Strategies
Geographical pricing
Discounts/allowances Promotional pricing Differentiated pricing Responses to Competitive Price Cuts

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Geographical Pricing Countertrade Barter (no money) Compensation deal(some money & some in goods) Buyback arrangement(Chemical company) Offset (spend substantial amount)

Discounts/ Allowances

Cash discount Quantity discount Functional discount Seasonal discount Allowance

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Promotional Pricing Tactics

Loss-leader pricing (super markets)
Special-event pricing Cash rebates (encourage buying in specified time) Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting

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Differentiated Pricing and Price Discrimination

Discrimination based on demand, volume and buyer class Customer-segment pricing (student passes, kerosene, sugar) Product-form pricing (different versions priced differently) Image pricing

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 Channel pricing (Coca cola)

Location pricing (theatre) Time pricing (Theatres, restaurants, hotels)

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Brand Leader Responses to Competitive Price Cuts

Maintain price Maintain price and add value

Reduce price
Increase price and improve quality Launch a low-price fighter line

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Promotion
Promotion is communication that builds and maintains favourable relationships by informing and persuading one or more audiences to view an organisation more positively and to accept its products.

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Promotion Mix
1. Advertising: Any paid form of non personal

presentation of ideas, goods, or services by an identified sponsor. 2. Sales Promotion: A variety of short term incentives to encourage trial or purchase of a product or service. 3. Events and experiences: Company sponsored activities and programs designed to create daily or special brand related interactions.

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4. Public relations and publicity: A variety of programs designed to promote or protect a companys image or its individual products. 5. Direct Marketing: Use of mail, telephone, fax, email, or internet to communicate directly with or solicit response or dialogue from specific customers and prospects 6. Personal selling: Face to face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions and procuring orders.
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Advertising Print and broadcast ads Packaging inserts Motion pictures Brochures and booklets Posters Billboards POP displays Logos Videotapes
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Sales Promotion Contests, games, sweepstakes Premiums Sampling Trade shows, exhibits Coupons Rebates Entertainment Continuity programs

Events/ Experiences Sports Entertainment Festivals Arts Causes Factory tours Company museums Street activities

Public Relations Press kits Speeches Seminars Annual reports Charitable donations Publications Community relations Lobbying

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Personal Selling Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows

Direct Marketing Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail E-mail Voice mail

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Purpose of promotion
1.Create awareness: New product, line extension, product adoption process. 2.Stimulate demand: Primary demand (product category rather than specific brand, pioneer promotion) Selective demand (strengths and benefits, differentiation w.r.to competitors)

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3. Encourage product trial: May stall during evaluation stage, samples, coupons, test drives, free issues. Useful for new product category, new brand, existing product. 4. Identify prospects: interested and most likely to buy, magazines with direct response information form, ads with toll-free number. 5. Retain loyal customers: retaining is cheaper, frequent user programs by airlines, hotels, retail stores

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6. Facilitate retailer support: Maintain sound working relationships, advertising allowances, free samples, coupon distribution, maintain inventory with special offers and buying allowances 7. Combat competitive promotional efforts: prevents loss of sales or market share, competitive consumer markets 8. Reduce sales fluctuations: climate, holidays, seasons, stimulate sales during sales slumps price discounts by hotels, fast food centers, retail stores etc.

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Promotional strategies
Pull strategy: Used to communicate with the end user customers, personal communication (or organisational) To generate increased level of awareness, change or reinforce attitudes, reduce risk, encourage involvement, develop an emotional attachment and ultimately influence consumer behaviour. TV, internet, mobile based media strategies

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Push strategy: Used to communicate with the channel intermediaries like dealers, distributors, and retailers. They do not consume but add value and forward it. Encourage to take stock and allocate resources, make them fully aware of the attributes and benefits, improve relationships.

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Profile strategy: Providing information about the organisation and its values, policies and position on issues rather than its products and services to stake holders. They include financial analysts, trade unions, govt bodies, employees and local communities

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Sales Promotion
Collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.

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Sales Promotion Tactics

Consumer-directed Samples Coupons Cash refund offers Price offs Premiums Prizes Patronage rewards Free trials Tie-in promotions
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Trade-directed Price offs Allowances Free goods Sales contests Spiffs Trade shows Specialty advertising

Using Sales Promotions

Establish objectives Select tools Develop program Pretest

Implement and control

Evaluate results
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