submission #1.pdf

8/18/2019 submission #1.pdf

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Bus 120 Essentials of Marketing

Tuesday & Thursday

BUS120 Group# 1

Names. Email. Number.

Anshul Saklani [email protected] 9878884489

Karanveer Singh Purba [email protected] 8699319354

Tarun Arora [email protected] 9888165007

Date submitted: Date due:

8th march 2016 8th march 2016

mailto:[email protected]:[email protected]:[email protected]


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Pricing Decisions & Strategies

Marketing Mix : 4 P’s

! Product

! PRICE

! Place

! Promotion

Pricing is a very important strategic issue, as it is directly related to product positioning. Price

is the only marketing mix instrument that creates revenues. A company’s global pricing

policy may make or break its overseas expansion efforts

Pricing and Business

! How companies price a product or service ultimately depends on the demand and

supply for it

!

Three Cs that influence demand and supply:

1. Customers

2. Competitors

3. Costs

Steps to Price a Product (Not always same):

! Develop Marketing Strategy

Market Analysis, Segmentation, Targeting and Positioning

! Marketing Mix Decision

Define the Product, Distribution and Promotional strategies

! Manage Demand curve


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Demand Price relation

! Cost

All fixed and variable cost is calculated

! Environmental Factors

PEST

! Set Pricing Objective

Profit maximization, Revenue maximization, Price stabilization

! Determination of Price

Use one or combination of the above factors and make a pricing structure, give discounts etc.

Pricing Objectives

! Current Profit Maximization

This stresses on Current profits, taking into account revenue and costs

! Current Revenue Maximization

Stresses on increasing the Current revenue, and not profits. The motive is to maximize market

share and gain profits in long term.

! Maximize Quantity

This stresses to maximize the number units sold to decrease long-term costs as the

experience curve predicts

! Maximize Profit Margin

Stresses to increase the profit margin per unit, as, number of unit being sold may be low.

! Quality Leadership

Use price to signal high quality, to position the product as quality leaders.

! Partial Cost Recovery


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Organization which has other revenue sources may seek partial cost recovery.

! Survival

In case of market decline or overcapacity, the emphasis may be on to the survival in the

market only and to cover the costs.

! Status Quo

Price Stabilization to avoid price wars and maintain stable level of profits

Skim Pricing

Skimming is the strategy used to pursue the objective of Profit Margin Maximization.

!

Skimming is most Appropriate ..

• Demand is expected to be relatively inelastic, ie. The customers targeted are not

highly price sensitive

• Large cost savings are not expected at high volumes or it is difficult to predict the cost

savings that can be achieved at high volumes

• The company does not have the resources to finance the last capital expenditure for

high volume production with initial low profit margins.

Penetration Pricing

• Charging a low price in order to penetrate market quickly

• Appropriate to saturate market prior to imitation by competitors

! Penetration Pricing, most appropriate

• Demand highly elastic, ie. Customers are price sensitive, the demand increases as the

price decreases.

• Economies of scale

• The product should be of mass appeal.

• Major threat by competition.


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Pricing Methods

! Cost Plus Pricing

Set the price at the production cost adding a certain profit margin.

! Target Return Pricing

Set the price to achieve a target return on investment.

! Value Based Pricing

Base the price on the effective value to the customers which is relative to the alternative

product.

!

Psychological Pricing

Base the price on psychological factors of the consumer.

Price Discounts

! Quantity Discounts

Offer to customers who purchase is large quantities.

!

Cumulative Quantity Discount

A discount that increase as the cumulative quantity increases.

! Seasonal Discount

Based on the time when the purchase is made.

! Cash Discount

Extended to customer who pay there bill before a specified date.

! Trade Discount

A functional discount offered to channel members for performing there roles.

! Promotional Discount A short term discounted price, offered to stimulate sale


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Coca Cola’s Pricing

Coca-Cola is a leading player in the Indian beverage market with a 60 per cent share in

the carbonated soft drinks segment, 36 per cent share in fruit drinks segment and 33 per

cent share in the packaged water segment.

! The company undertook the Affordability Strategy in 2002 by introducing the 200ml

RGB Bottle at US$ 0.1 to bring about the optimal affordable price value equation.

! The lead-pack in the market was the 300ml at US$ 0.16 .

! Each sub-brand of coca cola has different pricing strategy.

! Their pricing strategy is based on the competitors pricing, Pepsi is the direct

competitor to coke. Beverage market is said to be a oligopoly market

Factors Coca Cola keep in mind while determining the pricing strategy

! Price should be set according to the product demand of public.

! Price should be that which gives the company maximum revenue.

! Price should not be too low or too high than the price competitor is charging from

Their customers otherwise nobody will buy your product.

! Price must be keeping the view of your target market.


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References

! http://www.knowthis.com/pricing-decisions

! https://en.wikipedia.org/wiki/Pricing

! h t t p s : / / w w w . g o o g l e . c o . i n / w e b h p ? s o u r c e i d = c h r o m e -

instant&ion=1&espv=2&ie=UTF-8#q=pricing%20decisions%20by%20a

%20company

! http://www.yourarticlelibrary.com/product-pricing/9-factors-influencing-pricing-

decisions-of-a-company/12953/

! http://2012books.lardbucket.org/books/marketing-principles-v1.0/s18-02-factors-that-

affect-pricing-de.html

! http://archive.financialexpress.com/news/cocacola-raises-prices-for-all-cola-brands-

in-india/1277168
http://archive.financialexpress.com/news/cocacola-raises-prices-for-all-cola-brands-in-india/1277168http://2012books.lardbucket.org/books/marketing-principles-v1.0/s18-02-factors-that-affect-pricing-de.htmlhttp://www.yourarticlelibrary.com/product-pricing/9-factors-influencing-pricing-decisions-of-a-company/12953/https://www.google.co.in/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8%23q=pricing%2520decisions%2520by%2520a%2520companyhttps://en.wikipedia.org/wiki/Pricinghttp://www.knowthis.com/pricing-decisions

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