PRESENTATION ON

PRICING DECISION AND PRICING

STRATEGIES
PAVAN
PRASAD
PRAVEEN
PRIYANKA
RADHIKA
RAKESH
REVANSIDDAPPA
SAGAR
SHASHANK
SHIVKUMAR
SHREEDHAR
SIDDALING
SOUMYA
 SIGNIFICANCE OF PRICING

• Price is essential to marketing – Price is a matter of great importance to both

the buyer and the seller in the marketplace. In a money economy without prices,
there can be no marketing. Price denotes the value of a product or service expressed
in monetary terms. Only when a buyer and a seller agree on the price, do an
exchange and transfer of ownership take place.
• Price is a competitive weapon – Price is an important weapon to deal with
competition. Any company whether it is selling high, medium or low-priced
products, has to decide whether its prices will be above, below or equal to the prices
set by the competitors. This is a basic policy issue and affects the entire planning
process.
• Price determines the general standard of living – Price influences consumer
purchase decisions. It reflects the purchasing power of money and thus reflects the
general standard of living. The lower the prices in an economy, the greater will be
the purchasing power in the hands of the consumer and the higher will be the
standard of living.

• Price regulates demand – Price is the strongest ‘P’ of the four “Ps” of the
marketing mix. The marketing manager can regulate the demand for a product by
increasing or decreasing its price. To increase demand, reduce the price, and to
decrease demand increase the price.
Factors influencing Pricing

Internal
Factors

Objectives of Product
Firm Differentiation

Organisational Cost of the

Marketing Mix
Factors Product
 INTERNAL FACTORS

• Organisational Factors:
• In the organization pricing decision happens at two levels. At the higher
level of management, decisions like price range and pricing policies are
decided.
• The actual price is then determined by the lower-level management. It
must be noted, however, that such actual price decisions must keep into
consideration individual product strategies and the pricing policies decides
by the top level market.
• Objectives of Firm:

• Pricing contributes its share in attainment of the objectives of the firm. The
firm may have a variety of objectives including – sales revenue maximisation,
profit maximisation, market share maximisation, maximisation of customer
value, maintaining image and position, maintaining stable prices etc.
• Pricing policy must be established only after objectives of the firm have been
decided and understood.
Marketing Mix:

• Pricing is only one element of the marketing mix. All other elements
hold equal importance to the success of the marketing strategies of
the firm.
• Any shift in any of the elements has an impact on the other elements
of the marketing mix.
• A firm must make suitable changes to all the elements of the
marketing mix to succeed with a change in any element, e.g. an
increase in price will become acceptable only if it is
Product Differentiation:
• The price of the product very much depends upon the nature and
characteristics of the product.
• A differentiated product with value-added features like quality, size, color,
attractive packaging, different uses of the product, utility, etc. always forces
the customers to pay more price as compared to any other product.

Cost of the Product:

• Cost and price of a product are closely related and are independent. The
firm must decide on a
• The firm must also keep into consideration its cost of production as it would
not want to sell below the cost of production on a long-term basis.
 EXTERNAL FACTORS

• Demand:
• Market demand of a product obviously has a major impact over its pricing
policy. If the demand is inelastic then higher price may be fixed but if the
demand is elastic then prices must be competitive.
• Demand is affected by factors like, number and size of competitors, buying
capability and willingness of prospective buyers, their preferences etc.
• Competition:
• In a market with many competitors, prices have to be competitive without
compromising on the quality. But in a monopolistic kind of market, prices can
be determined by the market leader, irrespective of the pricing strategy of its
competitors.
• Supplies:
• If the price of raw material goes up then the price of finished goods is bound to
go up. Also, the supplier’s pricing policy has a direct impact on the prices.
• Scarcity or abundance of raw materials will also determine its prices’ thereby
affecting the overall price.

Economic Conditions:
• Overall economic conditions have a very important role to play in the pricing
decision.
• During a recession, prices have to be reduced considerably to sustain. On the
other hand, during the boom time, prices can be increased to reap the benefits
of an improved economy.
• Buyers:

• The nature and behavior of buyers will also have an influence on the pricing
decisions. Their buying capability and willingness to pay a certain price cannot
be ignored by the marketer.

• Government:

• Government may exercise some measure of price control through the

enactment of certain legislations etc. Such measures are taken to protect the
interest of people at large.
 OBJECTIVES OF PRICING DECISION

Price Stability:
• This is another important objective of an enterprise. Stability of prices over a period
reflects the efficiency of a concern. But in practice, on account of changing costs
from time to time, price stability cannot be achieved. In the market where there are
few sellers, every seller wants to maintain stability in prices. Price is set by one
producer and others follow him. He acts as a leader in price fixation.
Prevention of Competition:
• Modern industrial set up is confronted with cut throat competition. Pricing can be
used as one of the effective means to fight against the competition and business
rivalries. Lesser prices are charged by some firms to keep their competitors out of
the market. But a firm cannot afford to charge fewer prices over a long period of
time.
Market Share Objective:
• Market position or sales in relation to competition is a very meaningful benchmark
of success. Therefore, a firm may set a target market share as its pricing objective,
so that by focusing attention on it, it may not lose its former market position. It
tries to maintain at least the tatus quo or to improve its position through low
pricing commensurate with the cost.
To Prevent Competition Objective:
• Such pricing objective prevents competition. If the firm is its industry price leader,
it may set prices designed to discourage new competitors from entering the market.
Similarly, the firms that are price followers set their prices in order to meet
competitors’ prices. When introducing a new product, low prices should be set to
discourage competition.
 PRICING STRATEGIES

Competition-Based Pricing Strategy

• Competition-based pricing is also known as competitive pricing or competitor-based
pricing. This pricing strategy focuses on the existing market rate for a company’s product
or service; it doesn’t take into account the cost of its product or consumer demand.
Value-Based Pricing Strategy
• A value-based pricing strategy is when companies price their products or services based
on what the customer is willing to pay. Even if it can charge more for a product, the
company decides to set its prices based on customer interest and data.
• If used accurately, value-based pricing can boost your customer sentiment and loyalty. It
can also help you prioritize your customers in other facets of your business, like marketing
and service.
• Cost Based Pricing is a method companies use to set selling prices of goods
and services. This method of pricing allows companies to establish prices
according to the cost of producing goods or providing services. Cost-based
pricing consists of several methods of calculating appropriate selling prices. 
1.Cost-plus pricing
• Cost-plus pricing is a common method of cost-based pricing and uses the total
cost of goods sold (COGS) as the primary basis of pricing goods and services.
Companies calculate and use a fixed percentage that represents the expected
return on producing and selling goods.
2.Markup pricing
• Most retail companies use markup pricing, where retailers that purchase
items for resale add a certain percentage to the cost to get the selling price.
Market-Based Pricing
Market-based pricing is when a price of a product is set according to current market
prices for the same or similar products. In other words, market-based pricing means
setting prices in line with your competitors and the prices of their products.
When done right, a market-based pricing strategy allows a business to set prices
higher when a product is initially introduced, and later on align prices with market
prices to remain competitive while increasing profitability.
 Pricing procedure

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Setting Estimating Analyzing Selecting Selecting
Determining
pricing costs competitors pricing the final
demand
objective pricing methods price
 1. SETTING PRICE OBJECTIVES:

• Refers to set the goals of the pricing policy. An organization can have multiple pricing
objectives.

Some of the price objectives are discussed as follows:

• Pricing aim is to Survival of the company in the market.

• Quality of a Product:

• Increase the profit of the company.

• Achieving a target rate of Return on investment.

 2.DETERMINING DEMAND

• Generally, demand is inversely proportional to price.

• Demand decreases with the increasing in price.
• Demand increases with the decreasing in price.
• Some time for the prestige's goods the demand curve has an upward trend.
Example:
• Perfume- High price and high sales.
• Some of the products prices are too high than demand for the products decreases.
 3 . E S T I M AT I N G C O S T:

• Cost is estimated by the company.

Types of costs:
• Fixed costs.
• Variable costs.
4. Analysing competitor’s pricing.
5. Selecting pricing method.
The company needs to decide upon 3three elements called the 3 C’s while
setting the final price.
• Cost-based price.
• Competitors-based price.
• Customer demand-based price.
 6. SETTING THE FINAL PRICE:
1. Psychological pricing.
• High price and high quality product / services.
Ex:
• BMW car price is 18 to 25 lakh customer feel high price for high quality.
• BMW car price is 4 lakh customer will not believe at all.
2. Company’s pricing policies.
• Several companies have separate department that will take care of decision regarding the
price.
• The main aim of the sales people is to provide fair price products for customer and which
gives the profit to the organisation
3. Impact of price on other parties.
a) Dealers.
b) Distributors.
THANK YOU