PRICING STRATEGIESAnkit SinghEmail anktsngh15@gmail.com

PRICE - MEANINGThe sum of all the values that consumers exchange for the benefits of having or using the product or service

Price is Just not a number on Tag, Price comes in many forms & Performs many functions .Rents, tuition, fares, fees , rates, tolls, retainers, wages, & commissions all are some or the other way the price which We pay for getting the good or service.

CHANGING PRICE ENVIRONMENT ??Pricing trends are changing

Buyers are becoming empowered Can get Instant price comparisons from thousands of vendors (Policybazar.com)Name the price and have it met (Priceline.com)Get Products free ( Microsoft Products)

Sellers are getting competitive advantageMonitor Customer Behavior & tailor offers to individualsGive certain customers access to special prices

Both buyers & sellers can Negotiate prices in online auctions & exchanges (OLX & IBIBO)

HOW CONSUMER ARRIVES AT A PERCEPTION OF PRICEReference Prices : Comparing and Observed price with an internal reference price, or they remember an external frame of reference such as posted regular retail price.Sellers Manipulate by pricing high to give the impression that the product is of better quality, Manufacturers promote reference prices by indicating that product was priced much higher originally, or by pointing to a competitors price.

POSSIBLE CONSUMER REFERENCE PRICESFair priceTypical priceLast price paidUpper-bound priceLower-bound priceCompetitor pricesExpected future priceUsual discounted price

Price Quality Inferences : Many consumers uses price as an indicator of qualityHigh priced items are considered as of possessing high qualitySome brands adopt exclusivity & scarcity as a mean to Justify premium pricing.Luxury goods makers of watches, Jewelry , Perfume & other products often emphasize exclusively in their communications message & channel Strategies

Price Endings Many sellers believe prices should not end in an odd numberResearch has shown that consumers tend to process prices in a Left to right manner rather than by rounding's.Those companies who wants a high Price Image, it Should avoid the odd ending Tactic.

SETTING THE PRICESelecting the Final Price

SETTING THE PRICING OBJECTIVESurvival : As long as prices cover variable costs and some fixed costs , the company stays in business, its a short term objective in the long term the firm must learn how to add value and go for wealth maximization.

Maximum Current Profit : Many companies try to set price that will maximize current profits by estimating the demand the demands & costs associated with alternative prices.

Maximum Market Share : Some companies want to maximize their market share by believing that higher sales volume will lead to lower unit costs and higher long run- profit.

MARKET PENETRATION PRICINGConditions favoring adaptation of a Market Penetration Pricing Strategy :Market is highly price sensitive &low price stimulates Market GrowthProduction & Distribution cost fall with accumulated production experienceLow price discourages actual & potential competition.

ELASTICITY OF DEMANDIf demand hardly changes with the change in price we can say that the demand is Inelastic

The higher the elasticity , the greater the volume growth resulting from a 1 % price reduction.If demand is elastic sellers will consider lowering the price.Price elasticity may be negligible with a small price change & Substantial with a large price change, it may differ for a price cut versus a price Increase, & there may be a Price indifference band within which price changes have little or no effect.Long run price elasticity may differ from a short term price elasticity.

SETTING THE PRICING OBJECTIVE. CONTMaximum Market Skimming : Companies unveiling a new technology favor setting high prices to Maximize market skimming.This strategy can be fatal if a worthy competitor decides to price low.Conditions Favoring Market Skimming Strategy :A Sufficient Number of Buyers have a high current demand.The unit costs of producing a small volume are not so high that they cancel the advantage of charging what the traffic will bearThe higher initial price does not attract more competitors to the market.The high price communicates the image of a superior product.

SETTING THE PRICING OBJECTIVE. CONTProduct Quality Leadership : Many brands strives to be Affordable Luxuries products or services characterized by high level of perceived Quality, taste, and status with a price just high enough not be out of customers reach.Other Objective : Non- Profit organizations & Public organizations may have other pricing objectives.

Eg : A Non Profit hospital will price surgeries just to recover is operational cost. A University will aim for partial recovery, knowing that it must rely on donations & Public Grants to cover its remaining costs

DETERMINING DEMANDEach price will lead to a different level of demand & will therefore have a different impact on a company's marketing Objectives. In a normal case they are inversely related, the higher the price , the lower will be the demand, but sometimes this varies.Price Sensitivity of Demand :The Demand curves shows the markets probable purchase quantity at alternative prices, It sums the reactions of many Individuals who have different price sensitivities.Customers are less price sensitive when :There are less competitors in the marketThey do not readily notice the higher priceThey are slow to change their buying habitsThey think higher prices are justified.Price is the only a small part of the total cost of obtaining , operating & and servicing the product over its lifetime.

PRICE ELASTICITY OF DEMANDMeasure of the sensitivity of demand to changes in pricesnot price sensitive - no real change in demandprice sensitive - changes in demand100105

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