Pricing in Marketing Mix. ( Marketing Management)

This presentation provides an in-depth overview of various pricing strategies used in businesses across different industries. It covers key concepts such as cost-plus pricing, value-based pricing, competitive pricing, and psychological pricing, along with real-world examples and practical applications. Ideal for business students, marketers, and entrepreneurs, this guide helps you learn how to set the right prices for products and services to maximize profitability and stay competitive. Perfect for use in workshops, educational settings, or strategic planning meetings.

1. Pricing Price is all around us.

2. Pricing You pay rent for your apartment, tuition for your education, and a fee to your dentist or physician. The airline, railways, taxi and bus companies charge you a fare; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow.

3. Pricing Method adopted by a firm to set its selling price. It usually depends on the firm's average costs, and on the customer's perceived value of the product in comparison to his or her perceived value of the competing products.

4. Price brings in the revenues This is the only element in the marketing mix that brings in the revenues. All the rest are costs Price communicates the value positioning of the product.

5. Pricing A firm must set a price for the first time when It develops a new product It introduces its regular product into a new distribution channel or geographical area It enters bids on new contract work ( as in Industrial Sale )

6. Pricing A company must set its price in relation to the value delivered and perceived by the customer

7. Pricing

8. Pricing

9. PRICING Price = Cost + Profit

10. Pricing policy (Factors ) Selecting the pricing objective Determining demand Estimating costs Analyzing competitors – costs, prices, offers Selecting a pricing method Selecting the final price

11. The pricing objective The company first decides where it wants to position its market offering. The objective could be :-

12. The pricing Methods

13. Cost based pricing Selling price = Total cost of product + profit margin

14. Value Based Pricing Value-based pricing (VBP) is about setting a price to capture the value that a potential customer receives. Here are the steps: Identify your customer’s second best option. If your customer won’t buy your product or service, then what would he or she choose? Determine the price of the second best option. List all of the ways that your offering is better than the second best option. Estimate how much you think these differences are worth to your customers? List all of the ways that the second best offering is better than yours. Be very honest here. How much do you think these are worth to your customers? To calculate the best price — take the price of the second best option (step 2 above) plus the value of your advantages (step 3) minus the value of the second best option’s advantages (step 4). Price = step 2 + step 3 – step 4

15. Pricing Strategies Premium Pricing –  Used when  a product is considered unique  and where a substantial competitive advantage  exists.  Premium  pricing  is associated with luxury brands like Louis Vuitton , Jaguar, and Rolex

16. Pricing Strategies Price Skimming  – In this instance, a high price is set because you have a substantial competitive advantage, but know that the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. 

17. Pricing Strategies Penetration Pricing —  Charged for products and services is  set artificially low in order to gain market share . Once this is achieved, the price is increased. This approach was used by Netflix and Jio.

18. Pricing Strategies Economy Pricing —  This is a  no-frills low price . The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, biscuits, etc

19. PRICING STRATEGIES

20. PRICING MISTAKE #1 Comparing Prices for No Reason A recent study from Stanford University reveals that when it comes to  comparative pricing , a blunt request for customers to compare your prices against the competition (without a compelling reason why) can actually  dissuade  them from buying your product, as they lose trust in your marketing message.

21. PRICING MISTAKE #2 Not Testing Different ‘Levels’ of Pricing Test #1 — Standard drink+ Premium drink

22. Test #2 : Cheap drink+ Standard drink+ Premium drink

23. Test #3: Standard drink+ Premium drink+ Super-premium drink

24. PRICING MISTAKE #3 Not Keeping Prices Simple  According to a new study published in the  Journal of Consumer Psychology , researchers found that prices that contain more syllables (when spoken) seemed drastically higher to consumers.  consider the selection between the following prices: $1,499.00 $1,499 $1499

25. Creating Friction for Conservative Spenders Tightwads (25%):  These customers spend  less  on average before they hit their pain limits. Unconflicted (60%):  These are average spenders. Spendthrifts (15%):  These customers spend  more  on average before they hit their pain limits.

26. SOLUTIONS a.) Reduce multiple purchasing points with bundling b.) Reframe your product’s value $1000 is pretty expensive $84/month

27. Not Trusting an Old Classic! The study took a look at comparable price points for items like women’s clothing, using options such as $34 vs. $39, only to find that the higher $39 price shockingly  outsold  the cheaper price point by  24% . “Normally costs $70, now on sale for $55!” “Normally costs $70, now on sale for $59! ”

28. Not Utilizing the Power of Contextual Pricing A normal Drink in a grocery store would cost you much less or on MRP. But people tend to spend much more when they are in a restaurant or in a prestigious hotel. According to a study published in New York Times Magazine

29. Main factors affecting price determination of product 1. Product Cost 2. The Utility and Demand 3. Extent of Competition in the Market 4. Government and Legal Regulations 5. Pricing Objectives 6. Marketing Methods Used.

30. 1. Product Cost The most important factor affecting the price of a product is its cost. Product cost refers to the total of fixed costs, variable costs and semi variable costs incurred during the production, distribution and selling of the product. Fixed costs are those costs which remain fixed at all the levels of production or sales. For example, rent of building, salary, etc. Variable costs refer to the costs which are directly related to the levels of production or sales. For example, costs of raw material, labour costs etc. Semi variable costs are those which change with the level of activity but not in direct proportion. For example, fixed salary of Rs 12,000 + upto 6% graded commission on increase in volume of sales.

31. 2. The Utility and Demand Usually, consumers demand more units of a product when its price is low and vice versa. However, when the demand for a product is elastic, little variation in the price may result in large changes in quantity demanded. In case of inelastic demand, a change in the prices does not affect the demand significantly. Thus, a firm can charge higher profits in case of inelastic demand. Moreover, the buyer is ready to pay up to that point where he perceives utility from product to be at least equal to price paid. Thus, both utility and demand for a product affect its price.

32. 3. Extent of Competition in the Market The next important factor affecting the price for a product is the nature and degree of competition in the market. A firm can fix any price for its product if the degree of competition is low. However, when the level of competition is very high, the price of a product is determined on the basis of price of competitors’ products, their features and quality etc. For example, MRF Tyre company cannot fix the prices of its Tyres without considering the prices of Bridgestone Tyre Company, Goodyear Tyre company etc.

33. 4.Government and Legal Regulations The firms which have monopoly in the market, usually charge high price for their products. In order to protect the interest of the public, the government intervenes and regulates the prices of the commodities for this purpose; it declares some products as essential products for example. Life saving drugs etc.

34. 5. Pricing Objectives (a) Profit Maximisation : Usually the objective of any business is to maximise the profit. During short run, a firm can earn maximum profit by charging high price. However, during long run, a firm reduces price per unit to capture bigger share of the market and hence earn high profits through increased sales.

35. 5. Pricing Objectives (b) Obtaining Market Share Leadership: If the firm’s objective is to obtain a big market share, it keeps the price per unit low so that there is an increase in sales. (c) Surviving in a Competitive Market: If a firm is not able to face the competition and is finding difficulties in surviving, it may resort to free offer, discount or may try to liquidate its stock even at BOP (Best Obtainable Price). (d) Attaining Product Quality Leadership: Generally, firm charges higher prices to cover high quality and high cost if it’s backed by above objective.

36. DISCOUNT What are the 3 types of discount pricing? Seasonal: A seasonal discount is exactly as it states—businesses offer promotional discounts on seasonal goods or during particular seasons. Sometimes seasonal discounts are applied to out-of-season merchandise to sell old inventory. For example, when spring arrives, department stores may place a discount on winter coats since they are no longer needed.

37. DISCOUNT Clearance The word “clearance” is a marketing term businesses use to indicate their products are for sale at unusual discounts, like a buy one get one free offer for a limited time only. Retail stores may offer clearance on discontinued items with the hopes of liquidating what’s left in stock. Volume A volume discount incentivizes customers to purchase goods in multiple or large quantities. Bundling is a popular form of this type of quantity discount. Stores will reward people buying in bulk with a reduced price on the group of products. Retailers are able to reduce inventories when people buy in bulk.

38. What is Rebate? Rebate is a sales promotion technique in which certain part of the purchase amount is returned to the buyer by the seller. It is usually given on the purchase of a certain quantity or value, product and for a limited period of time. It should not be confused with discounts that is deducted from your purchase amount in advance of payment whereas rebates are given only after the payment of full purchase invoice amount.

39. What is Rebate? Rebate is basically a sales promotion method that marketers use to drive sales in the growth phase of the product when there is a competition between various brands to acquire large market share. It is also used to drive the sales of relatively less successful models of a particular product.

40. REBATES Rebate programs can be of many types: One of the most popular rebate is Mail in Rebate in which the entity offering rebate requires you to send the bar code of the product purchased, certain verified coupons, receipt to the firm or retailer offering rebate in order to receive the cheque or credits of particular amount. In certain case though, rebates may be given instantly after the purchase in the form of checks, loyalty card with points that can be spent immediately or within a certain period of time.