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PARAMJIT SHARMA 1
PRICING
PARAMJIT SHARMA 2
PRICING
Price is the only Revenue….
….. Rest are costs
PARAMJIT SHARMA 3
PRICINGWHAT IS PRICE FOR AN OFFERING ?
RENT FOR A BUILDING
Tariff for phone
Airlines,Rly.,Bus, Cab….Fare
Express way…..Toll
Can it be price ?
PARAMJIT SHARMA 4
PRICING
Price…..Quality…..Segmentation
SEGMENT
ULTIMATEGOLD STD.LUXURYSPF. NEEDSMIDDLEEASE/CONV.ME TOOPRICE ALONE
AUTOMOBILES
Rolls RoyceMercedesAudiVolvoBuickFord EscortHyundaiKia
PARAMJIT SHARMA 5
PRICING
Price…..Quality…..Segmentation
SEGMENT
.LUXURYSPF. NEEDSMIDDLECONV.EECONOMYME TOOPRICE ALONE
AUTOMOBILES
MercedesHonda CivicOctaviaCheverolet OptraSantroAltoMaruti 800
PARAMJIT SHARMA 6
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
PARAMJIT SHARMA 7
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
PARAMJIT SHARMA 8
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
PARAMJIT SHARMA 9
PRICING
Price …..Quality ….StrategiesPrice
Pro
du
ct Q
ual
ity
High Med low
H
M
L
1PremiumStrategy
2High value
strategy
3Super value
strategy
4Overcharging
strategy
5Medium
Value Stg.
6Good value
Strategy
7Rip off
Strategy
8False Econ.
Strategy
9EconomyStrategy
PARAMJIT SHARMA 10
PRICING
Price = Value
MissingOpportunity
Un harvestedValue
L
M
H
M H
Perceived Delivered Value
Pri
ce
Paid
Value Received
PARAMJIT SHARMA 11
PRICING
Factors in setting Prices
5Selecting pricing
Method
6Selecting the final
Price
4Analysing competitorsCosts,prices & offers
3Estimatingcosts
1Selecting pricing
objective
2 Determining Demand
PARAMJIT SHARMA 12
PRICING1 SELECTING PRICING OBJECTIVE
SurvivalMaximizing Current ProfitMax. Market ShareMax. Market SkimmingMaximising Product QualityNon Profit Organizations.
PARAMJIT SHARMA 13
PRICING
2 DETERMINING DEMAND
Price SensitivityEstimating demand curvesPrice elasticity of demand
PARAMJIT SHARMA 14
PRICING
Price Sensitivity
Unique value effectSubstitute awareness effectDifficult comparison effectTotal expenditure effectEnd benefit effectShare cost effectSunk investment effectPrice quality effectInventory effect
PARAMJIT SHARMA 15
PRICINGMeasuring Demand-Price Relationship
Statistical Analysis
Conducting Price Experiments
Buyers Surveys
PARAMJIT SHARMA 16
PRICING
Price Elasticity of Demand
A Inelastic demand B Elastic demand
Qty. demanded per period
pri
ce
Pri
ce
Qty. demanded per period
3
2
1oo 105 50 150
PARAMJIT SHARMA 17
PRICING
3Estimating Costs
•Types & level of prod.•Accumulated Production•Differentiated mktg Offer•Target costing
PARAMJIT SHARMA 18
PRICING
Types of costs & level of Production
Qty. produced per day Qty. produced per day
A cost behaviour in a fixed size plant
B cost behaviour over diff. size plant
1000
Cost
per
un
it
Cost
per
un
it
1 2 3 4
PARAMJIT SHARMA 19
PRICING
Accumulated Production1 2 4 8
Cost
per
un
it
10
8
6
4
2
Accumulated Production
PARAMJIT SHARMA 20
PRICING
44ANALYSING COMPETITORS’ANALYSING COMPETITORS’
COSTS
PRICES &
OFFERS
PARAMJIT SHARMA 21
PRICING5 SELECTING PRICING METHODMETHODMARK UP PRICING
TARGET RETURN PRICING
PERCEIVED VALUE PRICINGVALUE PRICING
GOING RATE PRICING
SEALED BID PRICING
PARAMJIT SHARMA 22
PRICING
SELECTING A PRICING METHOD
THREE Cs Model
HIGHPRICE
No Possibledemand
Lowprice
No Possibleprofit
Ceiling Price Ortn.Price Floor Price
CostsComp priceSub,Price
CustomersAssessment ofUPF
PARAMJIT SHARMA 23
PRICINGMarkup Pricing
Unit Cost Rs20---------------------- =------ = Rs25( 1- Desired Return) 1-0.2
HIGH
SeasonalSlow MovingHigh StorageLife saving Drugs
PARAMJIT SHARMA 24
PRICINGTarget Return Pricing
Desired Return* Invested Cap---------------------------------- Unit Sales
Unit cost +
PARAMJIT SHARMA 25
PRICING
Perceived Value Pricing
Attributes
Quality Impurities10% Less than 1% 150
Delivery within 2 wks within 1wk 20
System supply ch’cal total system 80
Innovation less R& D High R & d 300
Service Regional Local 50
St. Offer PremiumOffer
Added Value
PARAMJIT SHARMA 26
PRICINGVALUE PRICING
EDLP Charging low forHigh quality
Wal-Mart
PARAMJIT SHARMA 27
PRICING
Save up to 80% on 2002's hottest toys!
$38.00
Was: $69.77
$38.00
Was: $69.77
PARAMJIT SHARMA 28
PRICING
$26Was$32
$192Was$231
$41Was$61
PARAMJIT SHARMA 29
PRICINGSee the Big Games on a New TV
The football playoffs are starting, so get ready with a flat-screen model, projection TV or an HDTV.
Philips 50-inch Digital HDTV Monitor 50PP9202
$1,654.00
Was$1874
PARAMJIT SHARMA 30
PRICINGAuction Pricing
English Auctions
Sealed-BidAuctions
Dutch Auctions
PARAMJIT SHARMA 31
PRICING
Bid Profit Prob of getting bid
Expected
profit
9500 100 81% 81
10000 600 36 216
10500 1100 9% 99
11000 1600 1% 16
Effects on Different Bids
PARAMJIT SHARMA 32
PRICINGSELECTING THE FINAL PRICE
Psych
ological
1
M M Influence 2 3 Company
PP
4 Impact on others
PARAMJIT SHARMA 33
PRICINGAdapting the
Price
Geographical demand & costsMarket Segment RequirementsPurchase TimingsOrder levelsDelivery FrequencyService ContractsGuarantees………
PARAMJIT SHARMA 34
PRICING
AdaptingThe Price
Geographical
Discounts & Allowances
Promotional
Discriminatory
PARAMJIT SHARMA 35
PRICINGGeographical
Different or same price……How to get paid
•Barter•Compensation Deal•Buyback•offset
PARAMJIT SHARMA 36
PRICING
Price Discounts&
Allowances
Cash DiscountsQuantity DiscountsFunctional DiscountsSeasonal DiscountsAllowance Trade-in-Allowance Promotional Allowance
PARAMJIT SHARMA 37
PRICINGPromotional
Pricing
Loss LeaderSpecial EventsCash RebatesLow interest FinancingLonger Payment TermsWarranties & Service ContractsPsychological Discounting
PARAMJIT SHARMA 38
PRICINGDiscriminatory
Pricing
Customer Segment Pricing-MuseumsProduct Form Pricing-Cola PackingImage Pricing-PerfumesChannel Pricing-Rly Station..Theatre…5 starLocation Pricing-Balcony..Dress circleTime Pricing..seasons….day…night
PARAMJIT SHARMA 39
PRICINGProduct Line PricingOperational feature Pri.Captive Product PricingTwo part PricingBy Product PricingProduct Bundling Pricing
Product-MixPricing
PARAMJIT SHARMA 40
PRICING
INITIATING PRICECUTS
•Low quality trap•Fragile market share trap•Shallow pocket trap
PARAMJIT SHARMA 41
PRICING
INITIATING PRICE INCREASE
Over DemandInflation
PARAMJIT SHARMA 42
PRICING
Response To Over demandWithout Raising Price
Shrinking the productSubstitute materialsReducing product featuresRed. Product servicesUsing less Pac. Mat.Red. The No. of sizesCreating economy brand
PARAMJIT SHARMA 43
PRICING
COMPETITORSCUSTOMERS
ReactionsTo
Price Changes
PARAMJIT SHARMA 44
PRICING
Responding to Competitors
Price changes
Maintain price &Maintain price & add valueReduce priceIncrease price & Improve qualityLaunch a low price fighter line
PARAMJIT SHARMA 45
PRICING