Marketing pricing strategies
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MARKETING Pricing Strategies. Overview. Definition of price Factors that influence the pricing decision Pricing objectives Pricing strategies over the product life cycle Three major pricing strategies and their advantages and disadvantages

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MARKETING Pricing Strategies

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Marketing pricing strategies

MARKETINGPricing Strategies

Prof. Bauer-Ramazani



  • Definition of price

  • Factors that influence the pricing decision

  • Pricing objectives

  • Pricing strategies over the product life cycle

  • Three major pricing strategies and their advantages and disadvantages

  • Exercises applying different pricing strategies

  • Pricing tactics

Marketing pricing strategies

Price -- Definition

  • the amount of money charged for a product or service

  • the sum of all the values that consumers exchange for the benefits of having or using the product or service

  • Examples of “price?”

    • Tuition, rent, fare, retainer, toll, salary, dues

Factors in setting price

Factors in Setting Price

Pricing objectives

Pricing Objectives

Determining prices

Determining Prices

Market Share





Cost-Oriented- Variable/Fixed

  • Other Pricing Objectives

  • Loss Containment

  • Survival

  • Customer Benefit

  • Social & Ethical Considerations

Break-even Analysis



Economic Supply/Demand

Equilibrium price supply demand

Equilibrium Price: Supply = Demand

Price perflash drive/memory stick

Number of flash drives/memory sticks demanded

Elasticity of demand

Inelastic Demand





Q2 Q1


Elastic Demand









Elasticity of Demand

measure of the sensitivity of demand to changes in prices

not price sensitive - no real change in demand

price sensitive - changes in demand

Market based pricing

Market-based Pricing

  • PricingExisting Products/Services- 3 options

    • Pricing belowmarket prices  price wars

      • EX: airlines, store brand vs. manufacturer’s brand

      • Dumping

    • Pricing above prevailing market prices for similar products

      • EX: Sony  higher price = higher quality?

    • Pricing at or near market prices

Breakeven analysis

Breakeven Analysis

Breakeven point formula

Breakeven Point Formula

Breakeven Quantity=

Fixed Costs

Price/unit –Variable cost/unit

(Contribution Margin)

Cost based pricing

Cost-based Pricing

  • Estimating the per-unit cost of production

    • Capital(K): land, building, equipment = fixed cost(FC)

    • Labor (L): workers’ wages = variable cost (VC)

      EX: $0.50 + $0.50 =$1.00 (production cost)

  • Adding a mark-up

    • Desired profit per item: $0.50

  • Sales price = cost of production + mark-up

    • $1.00 + $0.50 = $1.50

    • 50% markup

Mark up calculation

Mark-up Calculation

How costs affect gasoline prices

How costs affect gasoline prices

Price strategies for new products


Low price establish product in the market

Elastic demand; Predatory pricing


High price; unique product; appeal to early adopters; Prestige pricing

Recovering high R&D costs


Move inventory; stimulate D; extend product life

Price Strategies for New Products

Penetration Price Strategy


Skimming Price Strategy


Skimming > Penetration


Pricing of iphones

Pricing of iPhones

Exercise select the appropriate pricing strategy explain your choice

Wal-Mart launches a new range of own-label soups.

Cunard launches two new cruise ships.

A cable TV provider moves into a new area and needs to achieve a market share.

Holiday Inns try to fill hotels during winter weekends.

Burger King introduces a new range of value meals.

Nokia launches a new videophone.

ExerciseSelect the appropriate pricing strategy. Explain your choice.

Pricing tactics

Pricing Tactics

  • Price Lining

    • Setting a limited number of prices for certain categories of products

  • Psychological Pricing

    • Pricing to take advantage of the fact that consumers do not always respond rationally to stated prices

  • Discounting

    • Price reductions offered as an incentive

      • to purchase

  • High tech Pricing: giving it away!

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