1.What is Pricing Value that will purchase definite quantity,weight orother measure of goods/services a price system is any economic system that effects itsdistribution of goods and services and employing anyform of money We need to set price when we have a new product, or when we enter a new market with an existing product

2. Determinants of PriceSupply Demand Shortage of raw materials Income of Consumer Breakdown of machinery Type of Product Delays in the transportation Consumers preferences,of finished goodstastes and desires Hoarding of goods by sellers change in fashion and technology Supply and demand are not the only determinants of price but simply useful catch-all categories for analyzing, describing the multitude of forces, causes and factors impinging on price 3. Pricing ObjectiveShort-term profit maximizationShort-term revenue maximizationMaximize quantityMaximize profit marginDifferentiation 4. Factors affecting PricingPositioningDemand CurveCostEnvironmental Factor 5. Market Pricing 6. Market Skimming High price, Low volumes Skim the profit from the market Suitable for products that have short life cycles orwhich will face competition at some point in thefuture (e.g. after a patent runs out) Examples include: Play station, jewellery, digitaltechnology, new DVDs, etc. 7. Value Pricing 8. Value Pricing Price set in accordance withcustomer perceptions aboutthe value of theproduct/service Examples include statusproducts/exclusive products 9. Psychological Pricing 10. Psychological Pricing Used to play on consumer perceptions Classic example Rs. 9.99 instead of Rs. 10.99! Links with value pricing high value goods priced according to what consumers THINK should be the price 11. Price Leadership 12. Price Leadership In case of price leader, rivals have difficulty incompeting on price May follow pricing leads of rivals especiallywhere those rivals have a clear dominance of market share 13. Influence of Elasticity 14. Influence of Elasticity Any pricing decision must be mindful of the impact ofprice elasticity The degree of price elasticity impacts on the level of salesand hence revenue Elasticity focuses on proportionate (percentage) changes PED = % Change in Quantity demanded/% Change inPrice 15. Influence of Elasticity Price Inelastic: % change in Q < % change in P e.g. a 5% increase in price would be met by a fall in sales ofsomething less than 5% Revenue would rise A 7% reduction in price would lead to a rise in sales ofsomething less than 7% Revenue would fall 16. Influence of Elasticity Price Elastic: % change in quantity demanded > % change in price e.g. A 4% rise in price would lead to sales falling bysomething more than 4% Revenue would fall A 9% fall in price would lead to a rise in sales of somethingmore than 9% Revenue would rise 17. Target Pricing 18. Target Pricing Setting price to target a specified profit level Estimates of the cost and potential revenue at differentprices, and thus the break-even have to be made, todetermine the mark-up Mark-up = Profit/Cost X 100 19. Marginal Cost Pricing 20. Marginal Cost Pricing Marginal cost the cost of producing ONE extra orONE fewer item of production MC pricing allows flexibility Allows variable pricing structure e.g. on a flightfrom Mumbai to New Delhi providing the cost ofthe extra passenger is covered, the price could bevaried a good deal to attract customers and fill the aircraft. 21. Marginal Cost Pricing Example: Aircraft flying from Mumbai to New Delhi Total Cost (including normal profit) = Rs. 15,000 of which Rs. 13,000 is fixed cost* Number of seats = 160, average price = Rs 93.75 MC of each passenger = 2000/160 = Rs 12.50 If flight not full, better to offer passengers chance of flying at Rs 12.50 and fill the seat than not fill it at all! 22. Penetration Pricing 23. Penetration Pricing Price set to penetrate the market Low price to secure high volumes Typical in mass market products chocolate bars, food stuffs, household goods, etc. Suitable for products with long anticipated life cycles May be useful if launching into a new market Example:- The Peoples Car-Tata Nano 24. Cost Plus Pricing 25. Cost Plus Pricing Calculation of the average cost (AC) plus a markup AC = Total Cost/Output All expenses with profit margin Disadvantage:-ignore the role of consumersignore the role of competitorsOver-pricing & Under pricingExample:- Mineral Water 26. Contribution Pricing 27. Contribution Pricing Contribution = Selling Price Variable (direct costs) Prices set to ensure coverage of variable costs and acontribution to the fixed costs Similar in principle to marginal cost pricing Break-even analysis might be useful in such circumstances 28. Tender Pricing 29. Tender Pricing Many contracts awarded on a tender basis inPublic Sector Firm (or firms) submit their price for carrying outthe work Purchaser then chooses which represents bestvalue Mostly done in secret Eg: Bandra Worli Sea Link 30. Absorption/Full Cost Pricing 31. Absorption/Full Cost Pricing Full Cost Pricing attempting to set price to coverboth fixed and variable costs Absorption Cost Pricing Price set to absorb some ofthe fixed costs of production 32. Transfer Pricing TP means the value or price at which transactionstake place amongst Associated Enterprises Associated Enterprise concept International Transaction Arm Length Price Transfer Pricing Manipulation 33. Factors for TPM Internal factors: Performance Measurement and Evaluation External Factors: Accounting Standard Income Tax Custom Duty Currency Fluctuations Risk of Expropriation 34. Price Discrimination 35. Price Discrimination Charging a different price for thesame good/service in differentmarkets Requires each market to beimpenetrable Requires different price elasticityof demand in each market 36. Destroyer Pricing 37. Destroyer Pricing Deliberate price cutting or offer of free gifts/products toforce rivals (normally smaller and weaker) out of businessor prevent new entrants Anti-competitive and illegal if it can be proved 38. Loss Leader 39. Loss Leader Goods/services deliberately sold below cost toencourage sales elsewhere Typical in supermarkets, e.g. at Christmas, sellingbottles of gin at Rs 3 in the hope that people willbe attracted to the store and buy other things Purchases of other items more than covers losson item sold 40. Pricing Policy Determine primary and secondary market segments Assess the products availability and near substitutes Survey the market for competitive and similar products Examine market pricing and economics Test different price points if possible Monitor the market and your competition continually toreassess pricing 41. GROUP 8:Bhushan KaradeManish Singh Paras Bajaj Prakash IyerPrasad Gawde