PRICING DECISION

PRICING
The amount or money charged for a product or service or the sum of the values that consumers exchange for the benefits of having or using the product or service. It is very delicate area of marketing management

Factors Affecting Pricing Decision

Internal
1.Marketing objectives 2.Marketing mix strategy 3.Costs

External

1.Market situation 2.Customer Expectations 3.Competition 4.The government control 5.Channel of distribution selected

Internal Factors
1.Marketing objectives
For example, if Audi cars wants to produce cars for Indian market and to compete with Indian luxury cars in the high-income segment, this suggests charging a high price.
If a restaurant wants to cater to the road travelers then this position requires a lower price.

2.Marketing mix strategy

Marketing strategy concerns the decisions marketers make to help the company satisfy its target market and attain its business and marketing objectives. Price, of course, is one of the key marketing mix decisions and since all marketing mix decisions must work together, the final price will be impacted by how other marketing decisions are made. For instance, marketers selling high quality products would be expected to price their products in a range that will add to the perception of the product being at a highlevel.

2.Marketing mix strategy

3.Cost of production

pricing is directly related to cost of production . A producer will like to cover entire cost of
production.

Every manufacturer calculates the cost of production and also cost of marketing, while fixing the price.

External Factors
1. Market situation
The general market situation has its influence on the pricing decision. For example: price should be low in competitive market, while it may be high in monopolistic (the sole right of marketing and selling something) market

2.Customer Expectations
Possibly the most obvious external factors that influence price setting are the expectations of customers and channel partners. As we discussed, when it comes to making a purchase decision customers assess the overall value of a product much more than they assess the price

3.Competition
Another external factor affecting the company's pricing decisions is competitors costs and prices, and possible competitor reactions to the company's own pricing moves. Marketers will undoubtedly look to market competitors for indications of how price should be set.

Competition

4.The government control

Government exercise effective control on retail prices. such control affect the freedom of manufacturers in price fixation. The purpose of such govt. control is to give protection to consumer. For example: increase in excise duty leads to increase in the price of commodities. Even indirect taxes lead to readjustment in the prices

5.Channel of distribution selected

Selection channel of distribution is necessary for marketing a product. Price fixation is difficult under the longer channel. Price fixation is simple if the channel is shorter. A manufacture prefer a shorter channel as he have more profit even by changing comparatively lower price to the consumer

Objective of pricing
Profit maximization Target return on investment Sales promotion Paying capacity of consumer Price stabilization

Pricing Strategies
1. 2. 3. 4. New-Product Pricing Strategies Product-Mix Pricing Strategies Price-adjustment Strategies Geographic Price Differential

1.New-Product Pricing Strategies A. Market-Skimming Pricing B. Market-Penetration Pricing

Market-Skimming Pricing
This aims at skimming the cream by taking advantage of the target segments willingness to pay a high price. Condition
A sufficiently large segment whose demand is relatively inelastic, not sensitive to a high price. Example Kodak cameras

 This policy is to charge a low price so as to stimulate demand for the product of the firm and capture a large share of the market Example: Nirma washing powder or Walmart Conditions
A highly price-sensitive market, high price elasticity Economies of scale in production or distribution. Low price likely to discourage competition

Penetration price

2.Product-Mix Pricing Strategies

A. Product Line Pricing B. Optional-Product Pricing C. Captive-Product Pricing D. By-Product Pricing E. Product Bundle Pricing

A. Price lining
Here, price of one product in the total range of the products is fixed. Price of the rest of the commodities is automatically determined by the relationship between the commodity whose price has been fixed and the rest of the commodities in the range. A firm producing shoes or shirts fixes up the price for a particular size, price of the rest of the

sizes is fixed automatically

B.Optional-Product Pricing
The pricing of optional or accessory products along with a main product

C.Captive-Product Pricing
Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera, Printer with a cartridge. In case of services, this strategy is called two-part pricing. Cell phone charges a flat rate for a basic calling plan, then charge for minutes over what the plan allows

D.By-Product Pricing

Setting a price for by-products in order to make the main products price more competitive

E.Product Bundle Pricing

Combing several products and offering the bundle at a reduced price, this is commonly known as combo price

Geographic Pricing
Products requiring marketers to pay higher costs that are affected by geographic area in which a product is sold may result in adjustments to compensate for the higher expense. The most likely cause for charging a different price rests with the cost of transporting a product from the suppliers distribution location to the buyers place of business.

 For example: shipping products by air to Hawaii may cost higher California manufacturer a much higher transportation cost than a shipment made to San Diego.

THANK YOU