Pricing
PRICING
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Introduction
· A process of determining price at which a product is
bought or sold
· It helps to determine what a company will receive in
exchange for its products
· A aspect of financial modelling and is one of the four Ps
of marketing mix
Characteristics
& Objectives of Pricing
·
Characteristics
o
Prices must cover costs and profits
o
Must be established to assure sales
o
Prices must assure that they
§ Reflects the dynamics of cost
§ Market demand
§ Response to the competition
§ Profit objectives
·
Objectives
o
Maximize Profits
o
Return On Investment
o
Positioning
o
Gain
o
Maintain market share
o
Maximize sales revenue
o
Improve cash flow
o
Build a brand
Determinants
& Strategies of Pricing
·
Determinants
o
Demand
o
Supply
o
Competition
o
Cost
§ Cost plus
§ Marginal cost
§ Pricing for a rate of return
o
Government
§ Price discrimination
§ Vertical price fixing
§ Horizontal price fixing
o
Customer
§ Comparison effect
§ Benefit effect
§ Situation effect
·
Strategies
o
Skimming Pricing
o
Penetration Pricing
o
Premium Pricing
o
Captive Pricing
o
Psychological Pricing
§ Prestige Pricing
§ Traditional Pricing
§ Odd-Even Pricing
o
Multiple Pricing
o
Bundle Pricing
o
Product Line Pricing
o
Extinction Pricing
o
Everyday Low Pricing
o
Geographical Pricing
o
Perceived Value Pricing
o
Optional Product Pricing
o Fixed & Variable pricing
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