1. Pricing Strategy
Chapter: 11
Lec: 8b

2. Price Adjustment Strategies
Segmented Pricing
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.
customer-segment pricing
e.g. Museums, students and elderly people pay less price for the ticket

3. Price Adjustment Strategies
Segmented Pricing
-product form pricing
e.g. the bigger the size of the mineral water bottle the price will not change like that
Small Rs. 10, Medium……
- Location pricing
e.g. Universities charge higher price for out of country students (international students)

4. Price Adjustment Strategies
Segmented pricing
Time Pricing
e.g. Cinema charges higher tickets on weekends
- Airlines ticket vary within minutes

5. Price Adjustment Strategies
Psychological Pricing
A pricing approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product
- higher price, higher quality
Reference pricing
Prices that buyers carry in their minds and refer to when they look at given product

6. Price Adjustment Strategies
Psychological Pricing
e.g. -Buy one get one free
-Buy one get other at half price
-Sale
-Rs. 99

7. Price Adjustment Strategies

8. Price Adjustment Strategies
Promotional Pricing
Temporarily pricing products below the list price, and sometimes even below cost. To increase short-run sales
-Adverse effects
Customers will wait for the sale
Competitor will follow

9. Price Adjustment Strategies

10. Price Adjustment Strategies
Geographical Pricing
Setting prices for customers located in different parts of the country or world
- FOB (Free on Board)
A geographical pricing strategy in which goods are placed free on board a carrier, the customer pays the freight from the factory to the destination
Factory------customer freight-----Destination

11. Price Adjustment Strategies
Uniform delivered pricing
A geographical pricing strategy in which the company charges the same price plus freight to all customers regardless of the destination
Factory--same freight for everyone---destination
Zone pricing
A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price
Factory—freight according to zone--destination

12. Price Adjustment Strategies
Dynamic Pricing
Adjusting prices continually to meet the characteristics and needs of individual customers and situations
- change in the fixed price policy
International Pricing
different prices in different countries
e.g. McDonalds
Gucci

13. Price Adjustment Strategies

14. Price Changes Initiating Price changes
Buyer and competitor reactions should be anticipated
- Initiating Price Cuts
- Excess Capacity
- Falling demand due to competition
- ‘low’ price as promotion
e.g. “Big Bazar”…India’s Republic Day as “sab say sast din”
e.g. CNG Stations

15. Price Changes Initiating Price Increases
- a successful price increase can increase profits
- make low visible price increase
- justify your price increase
- avoid direct price increase
e.g. start charging for food during an air travel
- extra luggage!, pillow, blanket

16. Price Changes Buyer Reaction to price changes
- Increase (quality is increased or they are charging too much)
- Cut (Quality is decreased, getting rid of excess things, concerned about us)
e.g. Tiffany
Competitors reaction to price changes

17. Price Changes