Price is all around us. You pay rent for your apartment, tuition for your education, and a fee to your dentist or physician. The airline, railways, taxi & bus agencies charge you a fare; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow. In our day-to-day life, for every exchange of product and services we pay viz value of product is called price..
PRICE
- It is unique element in Marketing Mix or rather perhaps first “P” of marketing mix.
- Price is the value express in money and cost of transferring the ownership.
- Price means total product offering; like brand name, product benefits & features, after-sales-service, Distribution Channels, sales promotions, discount, personal selling etc.
- Price = Cost + Profit.
- Rs 250 = 200+ 50.
- This is the only element in the marketing mix that brings in the revenues and all the rest are costs.
- Price communicates the value positioning of the product.
- Price at some extent determined quality of product.
- Price what a consumer is willing to pay for a product.
Pricing policy
- Selecting the pricing objective.
- Determining demand.
- Estimating costs.
- Analyzing competitors – costs, prices, offers.
- Selecting a pricing method.
- Selecting the final price.
- Survival.
- Sales volume
- Maximum current profit
- Maximum market share – penetration pricing
- Maximum market skimming
- Product quality leadership
- Rate of Return On Investment
In competitive market the market forces of demand (purchasing) and supply (selling) will determined the price of products. The most important element of the market would be the substitute, which plays very significant variable in pricing of the product. Hence demand would be;
- Price sensitivity
- Price elasticity of demand
- Shared cost
- Sunk investment
- Price – quality
- Inventory effect
- Productivity
- Unique value effect
- Substitute awareness
- Difficult comparison
- End benefit
- Total expenditure
- This determines the changes in demand with unit change in price
- If there is little or no change in deenmand, it is said to be price inelastic.
- If there is significant change in demand, then it is said to be price elastic.
- There are few or no substitutes
- Buyers readily do not notice the higher price
- Buyers are slow to change their buying habits
- Buyers think that the higher prices are justified
- No aggressive competitor in the market.
- Fixed costs
- Variable costs
- Learning curve
- Activity based costing
- Target costing
Pricing methods
- Markup pricing
- Target return pricing
- Perceived value pricing
- Value pricing
- Going rate pricing
- Sealed bid pricing
- It is used to lessen the impact of the actual pricing in the consumers mind.
- It is used as a surrogate to indicate the product quality or esteem.
- Group Pricing.
- Gain and Risk sharing pricing.
- Different pricing at different locations.
- Could be in terms of barter, counter trade and foreign currency.
- Early payment
- Off – season
- Bulk purchase
- Retail discount
- Cash discount
- Trade in allowance
- Loss leader pricing
- Special event pricing
- Cash rebate
- Low interest financing
- Longer payment terms
- Warranties and service contracts
- Psychological discounting
- Customer segment
- Product form
- Image pricing
- Location pricing
- Time pricing
- Product line pricing
- Optional feature pricing
- Captive product pricing
- Two part pricing
- Byproduct pricing
- Product bundling pricing
- Excess plant capacity
- Competition
- Aggressive pricing
Initiating price increases;
- When demand exceeds supply
- When costs go up
- Govt. policies
- Reduce/remove discounts and rebates
- Shrinking pack size for same price
- Substituting less expensive raw materials
- Reducing product features
- Removing product services
- Using less expensive packaging material
- Reducing the no. of packs and sizes offered
- Creating new economy brands
- Maintain price
- Maintain price and add value
- Reduce price
- Increase price and quality
- Launch a low price fighter
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