Pricing Strategies Under different market conditions
UNDER GUIDANCE OF:-
DR. DEEPALI SINGH
Department of Information Technology
What is Pricing ?
Pricing is one of the four major elements of the marketing mix. •
Pricing is an important strategic issue because it is related to product positioning. •
Pricing affects other marketing mix elements such as product features, channel decisions, and promotion. •
Pricing is an approach in which marketers put a value tag on a particular product.
Pricing Pricing Strategy
Pricing can be done during the various stages of the product lifecycle. These are called Pricing Strategies
To set the specific price level that achieves their pricing objectives, managers may make use of several pricing methods. These methods include: •
Cost-plus pricing - set the price at the production cost plus 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 customer relative to alternative products. •
Psychological pricing - base the price on factors such as signals of product quality, popular price points, and what the consumer perceives to be fair.
Pricing Strategies Matrix
Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights. •
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV. •
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. •
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.
How Pricing is done ?
For a new product ( introduction phase )
The following is a general sequence of steps that might be followed for developing the pricing of a new product: 1.
Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning. 2.
Make marketing mix decisions - define the product, distribution, and promotional tactics. 3.
Estimate the demand curve - understand how quantity demanded varies with price. 4.
Calculate cost - include fixed and variable costs associated with the product. 5.
Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc. 6.
Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization (status quo). 7.
Determine pricing - using information collected in the above steps, select a pricing method, develop the pricing structure, and define discounts. •
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