Pricing Strategy Objectives
Long Run Profits
Short Run Profits
Increase Sales Volume
Company Growth
Match Competitors Price
Create Interest & Excitement about the Product
Discourage Competitors From cutting Price
Social, Ethical & Ideological Objectives
Discourage New Entrants
Survival
Decisions in Pricing Strategy
Fixed & Variable Cost
Competition
Company Objectives
Proposed Positioning Strategies
Target Group & Willingness to Pay
External Market Demand
Internal Factors; Product Cost & Objectives of Company
Pricing Strategies
Marketing Skimming
Cost Plus Pricing
Value Pricing
Contribution Pricing
Loss Leader
Target Pricing
Psychological Pricing
Marginal Cost Pricing
Going Rate (Price Leadership))
Absorption Cost Pricing
Tender Pricing
Destroyer Pricing
Price Discrimination
Influence of Elasticity
Penetration Pricing
Market Skimming Pricing
High Price low volume
Skim the Profit from the Market
Suitable for the products that have short life cycle or Which will face competition at some point in future.
•Examples; Play Station, Digital Technology
Value Pricing
Based on consumer Perception.
Price charged according to the Customers Perception
Price set by the company as per the perceived value.
Example; Status Products/ Exclusive Products.
Loss Leader Pricing
Goods/services deliberately sold below cost to encourage sales elsewhere
Typical in supermarkets, e.g. at Diwali, selling Mobile at Rs500/- in the hope that people will be attracted to the store and buy other things
Purchases of other items more than covers 'loss' on item sold
Psychological Pricing
Used to play on consumer perceptions
Classic example - Rs 9.99 instead of Rs10.99!
Links with value pricing - high value - goods priced according to what consumers THINK should be the price
Going Rate Pricing
In case of price leader, rivals have difficulty in competing on price - too - high and they lose market share, too low and the price leader would match price and force smaller rival out of market
May follow pricing leads of rivals especially where those rivals have a clear dominance of market share
Where competition is limited, 'going rate' pricing may be applicable – banks, petrol, supermarkets, electrical goods - find very similar prices in all outlets
Tender Pricing
Many contracts awarded on a tender basis
Firm (or firms) submit their price for carrying out the work
Purchaser then chooses which represents best value
Mostly done in secret