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CASE STUDY

WHAT IS PRICE ? PRICE The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

PRODUCT MIX PRICING STRATEGIES  Product Line Pricing  Optional Product Pricing  Captive Product Pricing  By Product Pricing  Product Bundle Pricing  PRODUCT LINE PRICING Setting Price Steps Between Product Line Items. Product line pricing takes into account the cost difference between products in the line, customer evaluation of their features, and competitors’ prices. Rs 549 Rs 318

PRODUCT MIX PRICING STRATEGIES  OPTIONAL PRODUCT PRICING  Optional product pricing takes into account optional or accessory products along with the main product. New car with ordinary rims $59,000 New car with sports rims $60,000

PRODUCT MIX PRICING STRATEGIES  CAPTIVE PRODUCT PRICING  Pricing products that must be used with the main product High margins are often set for supplies  Services: two-part pricing strategy Fixed fee plus a variable usage rate

PRICE ADJUSTMENT STRATEGIES (Cont’d) Conditions For Segmented Pricing:  The market must be segmentable  The segments must show different degrees of demand  The cost of segmenting and watching the market cannot exceed the extra revenue obtained from the price difference  The segmented pricing must also be legal  Segmented pricing should reflect real differences in customers’ perceived value

PSYCHOLOGICAL PRICING REFERENCE PRICES Another aspect of psychological pricing is reference price – prices that buyers carry in their minds and refer to when they look at a given product. A price approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product. Many consumer use the price to judge quality. e.g. Consumer usually perceives higher- priced products as having high quality.

PRICING CUES Consumers rely on different cues that signal whether a price is high or low. Interestingly, such pricing cues are often provided by the seller. Common pricing cues are as follows: 1.Sale Signs The most straightforward retail pricing cue is a sale sign. It might take any of several familiar forms; “Sale!” “Reduced!” “New low price!” “price after rebate!” or Now 2 for only... !” 2.Pricing Ending In 9: Just like a sale sign, a 9 at the end of a price often signals a bargain.

PRICING CUES (Cont’d) 3. Sign Post Pricing (Or Loss Leader Pricing) In this technique seller selected sign post items at or below cost to pull customers into the store, hoping to make money on the shopper’s other purchases. 4. Price-matching Guarantee Another widely used pricing cue is price-matching. Where by stores promise to meet or beat any competitor’s price

PROMOTIONAL PRICING Cell phone marketers will take a loss on the phone to use as a promotional discount Marketing in Action

GEOGRAPHICAL PRICING Geographical Pricing is used for customers in different parts of the country or the world.  FOB Pricing  Uniformed Delivery Pricing  Zone Pricing  Basing Point Pricing  Freight Absorption Pricing

DYNAMIC PRICING (Cont’d) DYNAMIC PRICING CAN ALSO BE CONTROVERSIAL Amazon.com learned this some years ago when it experimented with lowering prices to new customers and higher prices to its regular customers. CAUTION AVOIDS SORROWS Dynamic pricing makes sense in many contexts. It adjusts prices according to market forces, and it often works to the benefit of the customers. Marketers need to be careful while using dynamic pricing.

PRICE CHANGES After developing the price structures and strategies, companies often face situations in which they must initiate price changes or respond to price changes by competitors. a) Initiating price changes b) Initiating price cuts c) Initiating price increases A.INITIATING PRICE CHANGES In some cases, company may find it desirable to initiate either a price increase. In both cases, it must anticipate possible buyer and competitor reactions.

PRICE CHANGES RESPONDING TO COMPETITORS’ PRICE CHANGES