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Pricing Strategy

Pricing Strategy. Chapter: 11 Lec : 8b. 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

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Pricing Strategy

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  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

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