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Price Mix

Price Mix. Price. Sum of all the values that consumers exchange for the benefits of having / using the product Monetary Energy Time Psychic. Factors Determining Pricing. Internal & External. Factors Determining Pricing. Marketing Objective Survival Profit Maximisation

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Price Mix

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  1. Price Mix

  2. Price • Sum of all the values that consumers exchange for the benefits of having / using the product • Monetary • Energy • Time • Psychic

  3. Factors Determining Pricing Internal & External

  4. Factors Determining Pricing • Marketing Objective • Survival • Profit Maximisation • Share Maximisation • Quality Leadership • Blocking of Competition

  5. Factors Determining Pricing • Marketing Mix Strategy • Coordinated with other mix elements • Positioning: Price vs. Non-Price • Product: Image / Quality Perception • Distribution: Push vs. Pull

  6. Factors Determining Pricing • Costs • Price that covers costs & gives a healthy ROI • Fixed Cost + Variable Cost = Total Cost • Cost Reduction vs. Profit Reduction

  7. Factors Determining Pricing • Market Demand • Sets the upper limit of prices • Type of Market • Pure Competition (Uniform Product) • Monopolistic Competition (Differentiated Product) • Oligopolistic Competition (Most price sensitive) • Pure Monopoly • Price-Demand Relationship

  8. Factors Determining Pricing • Consumer Perception of Value • Buyer Orientation • Value Maximisation

  9. Factors Determining Pricing • Price Sensitivity • Elastic vs. Inelastic • Unique Products vs. Substitutable Products • Share of Wallet

  10. Factors Determining Pricing • Competitors Cost & Price • Consumer Consideration Set • Benchmarking • Competitive Position

  11. Methods of Price Determination Cost Based Value Based Competition Based

  12. Cost Based Pricing • Cost Plus Pricing • Cost + Standard Markup • Ignores Competition & Demand • Fair & Certain • Ideal for customised products: Construction

  13. Value Based Pricing • Starting point is customer • Price is determined on the basis of value associated • Keeping profit margin a cost is determined • On the basis of the cost a product is designed • Commonly used be restaurants

  14. Competition Based Pricing • Going rate pricing • Product Comparison • Parity: Match Pricing • Superior: Higher Pricing • Inferior: Lower Pricing

  15. Strategies for Pricing of New Products Market Skimming Market Penetration

  16. Market-Skimming Pricing • Skim revenues layer by layer • Start by selling at high prices to innovators • Conditions • Quality & Image must justify the price • Sizeable demand at that price • Additional cost of low volume should not offset the price premium • Competition should not replicate at lower prices

  17. Market-Penetration Pricing • Opposite of skimming • Set a low price to penetrate and have high MS • Volumes offset value gains • Upward revision post loyalty • Conditions • Market is price sensitive • Scale must result in cost reduction • Competition should not better the price

  18. Strategies for Pricing of Product Mix

  19. Product Line Pricing • Different prices for different products in the line on the basis of • Cost Differences • Customer Value Assessment • Competitors Prices • Cover the entire range of customers • Must be well distinguished from each other

  20. Optional Product Pricing • Base Product at lowest pricing • Variations of the base product with different add-ons for customer benefit • Base Product: Promotion Product • Variants: Sales Product • Most commonly used in automobiles

  21. Captive Product Pricing • Main Product + Captive Product • Sell main product on low price • Make high margins on captive products • Nintendo Console + Games • Canon Printer + Catridge • Multiplex Ticket + Refreshment

  22. Bundle Pricing • Combining various products and offering the bundle at a price which is less than the sum of the individual MRPs of the products • Helps sell more of a brand to the customer • McDonald’s Value Meals • Hotel Package

  23. Price Adjustment Strategies Discounts

  24. Discount Pricing • Adjustment in basic pricing to reward / induce the customer to buy • Higher Volume of a Product • Off-Season • Loyal Buyer • Types of discounts • Cash • Quantity • Seasonal

  25. Allowance Pricing • Price reduction for turning in an old item when buying a new one • Induce customers to replace products earlier than required • Most commonly used in industries such as – • Automobiles • Durables

  26. Segmented Pricing • Product is sold at two or more different prices even though the cost is the same • Customer Segment Pricing(Rail Travel) • Location Pricing (Cinema Hall) • Time Pricing (Season, Month, Day, Hour)

  27. Psychological Pricing • Prices work psychologically and say something about the product • Not just about economics • Work using reference prices • Suggest product difference / value • 299 vs. 300

  28. Promotional Pricing • Temporary drop in prices to create buying excitement and urgency • Loss Leadership (Diapers) • Special-Event (Diwali) • Overuse can result in • Deal Syndrome • Dilution of Brand Equity • Price Wars

  29. Price Changes

  30. Price Cuts • Underutilised capacity • Falling market share • Gain share from competitor • Guard for consumer reaction • Predict the competitive reaction

  31. Price Increases • Rising input costs • Overdemand & shortage • Methods • Absolute Increase • Effective Increase • Reasons should be communicated • Guard for consumer reaction • Predict the competitive reaction

  32. Responding to Competitive Price Changes • Is the category price sensitive • Actions • Match price • Increase perceived quality • Improve product and increase price • Launch a fighter brand

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