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Pricing Methods
By- Karan Shah (140)
Shweta Shinde (152)
Sanmeet Surve (160)
Kiran Uikey (171)
Akanksha Wattal (176)
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Steps in setting up a price
1. Selecting the pricing objective
2. Determining Demand
3. Estimating Cost4. Analyzing Competitors Costs, Prices, and
Offers
5. Selecting a Pricing Method6. Selecting the Final Price
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Markup Pricing
Going-rate Pricing
Target-Return Pricing
Perceived Value Pricing
Value Pricing
Auction-Type Pricing
Psychological Pricing
Group Pricing
Pricing methods
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Markup Pricing
Most elementary method of pricing
Standard markup added to the products cost
Calculation :
For 30% markup priceMarkup price = Unit cost
1desired return on sales
Where,Unit Cost = Variable cost + fixed cost
Unit sales
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Markup Price
Products with the biggest markup pricing:
Prescription medicine have the highest
markups.
Movie theater popcorn/candy.
Branded clothing
Restaurant drinks (hard drinks and soda)Packaged drinking water
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Going rate pricing
The product is priced on the basis of the
prevailing market price.
Mostly applicable for the homogeneous
products with little variations.
eg. Aluminum, Steel, Plastic products
It is used where less competition is required.eg. Bank, Supermarkets,
Soft drinks
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Target rate of Return Pricing It determines the price that would yield its
target rate of return on investment (ROI).
Target-return price=
Unit cost+(Desired Return x Invested Capital)Unit Sales
Electric and Gas companies
Automobile manufacturers likeGeneral motors, Hyundai
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Perceived value pricing
Based on customers perceived value
i.e how much customers are willing to pay for
it
Perceived value elements
Key-to deliver more value than competitor
Lifetime operating costs will be low Example-Apple
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Value pricing
To win loyal customers by charging low price
for a high quality offering
Reengineering companys operations
To attract large number of value-conscious
customers
Major trend in the computer industry Example- McDonalds
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Auction Pricing
English auctionsAscending bidseg. IPL , Ebay
Dutch auctions Descending bids
eg. IPO shares , Passing a tender
Sealed-bid auctions
bidding price is not revealed
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Psychological Pricing
Price based on human Psychology
Prefers 2 digit number over 3 digit and so on
Price ending with an odd digit
Use words like special , sale
Packaging style
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Group Pricing
Consumers and or business buyers join
groups to avail off volume discounts
Groceries for purchases like poultry, frozen
meat, dairy and bakery etc.
Construction companies
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Group Purchasing Organization
Entity created to leverage the purchasing
power of a group of businesses to obtain
discounts from vendors based on the
collective buying power of the GPO members
Healthcare GPO, Foodservice GPO, Industrial
manufacturing GPO
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