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Pricing Objectives and Methods

The document discusses various objectives and methods of pricing. It explains that pricing is the process of determining the amount received for products and considers factors like costs, competition and demand. It then outlines different pricing objectives companies may have like profit maximization. The document also details various pricing methods such as cost-based pricing, demand-based pricing, and competition-based pricing. It provides examples of each method and factors that influence pricing decisions.

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Roopesh Kannur
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9K views17 pages

Pricing Objectives and Methods

The document discusses various objectives and methods of pricing. It explains that pricing is the process of determining the amount received for products and considers factors like costs, competition and demand. It then outlines different pricing objectives companies may have like profit maximization. The document also details various pricing methods such as cost-based pricing, demand-based pricing, and competition-based pricing. It provides examples of each method and factors that influence pricing decisions.

Uploaded by

Roopesh Kannur
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
  • Introduction to Pricing: Introduces the main theme of the presentation, focusing on objectives and methods related to pricing.
  • Definition and Concept of Pricing: Defines pricing and its importance from both producer and consumer perspectives.
  • Role and Importance of Pricing: Explains how pricing contributes to achieving business objectives and its overall influence on economic regulation and quality perception.
  • What Pricing Should Achieve: Outlines the goals a pricing strategy should achieve such as financial targets and market positioning.
  • Factors Determining Pricing: Discusses internal and external factors that influence pricing decisions, including market conditions and competitive dynamics.
  • Steps in Pricing Decision: Describes the process involved in setting prices, from analyzing objectives to market monitoring.
  • Objectives of Pricing: Lists various pricing objectives such as ROI, market share, and price stabilization to improve business competitiveness.
  • Methods of Pricing: Explores different pricing methods including cost, demand, and competition-based strategies.

PRICING- OBJECTIVES AND

METHODS
PRESENTED BY
ROOPESH M
S2 MBA
IMK KOLLAM
• Pricing is the process of determining what a
company will receive in exchange for its
products. Pricing factors are manufacturing
cost, market place, competition, market
condition, and quality of product.
• From the marketer's point of view, an efficient
price is a price that is very close to the
maximum that customers are prepared to pay.
PRICING
• Price is what customers are willing to pay for
services.
• In simple sense, price is the exchange value
for a product or service expressed in terms of
money.
• The relationship between price and sales
volume is inverse.
• In economic terms, it is a price that shifts most
of the consumer surplus to the producer.
• Pricing is a fundamental aspect of financial
modeling and is one of the four Ps of
the marketing mix. The other three aspects
are product, promotion, and place.
• Price is the only revenue generating element
amongst the four Ps, the rest being cost
centers.
ROLE AND IMPORTANCE OF PRICING
1. It helps to attain the objectives.
2. It is an economic regulator
3. It denotes the quality of products
4. It influences demand
5. Pricing is very useful in developing marketing
strategies.
6. It affect the standard of living of the people.
What a price should do

A well chosen price should do three things:


• achieve the financial goals of the company
(e.g., profitability)
• fit the realities of the marketplace (Will
customers buy at that price?)
• support a product's positioning and be
consistent with the other variables in
the marketing mix
Factors Determining Pricing
Internal Factors
• Organizational factors
• Marketing Mix elements
• Product differentiation
• Positioning
• Service cost
• Pricing objectives
External Factors
• Competition
• buyers
• Demand
• Suppliers
• Economic conditions
• Regulatory factors
Steps involved in pricing decisions

• Analyzing the organizational objectives.


• Analyze cost incurred in delivering the service.
• Determine demand levels and customer characteristics.
• Examine competitor pricing and positioning.
• Consider the regulatory measures relating to pricing.
• Set price based on the method adopted-cost, demand,
competitor.
• Implement suitable strategy based on market condition.
• Monitor the market response to the price set and identify
problems.
Objectives of pricing
1. Return on investment
the objective of is to earn a certain rate of
return on investment(target return).It adopt seller
oriented pricing policy.
2. Market share
by reducing price, customers are benefited
and the company can capture market [Link]
acieve this aim firms may sell even at a loss.
3. profit maximisation
a company may fix a low price with a view to
increase the volume of sales and thereby profit
4. To meet or prevent competition
while fixing the price, one has to look into the
prices of rival products and the existing competition.
[Link] stabilisation
it means bringing the price of the product at a
narrow range and preventing frequent and violent
fluctuations in price. It also gives continuous income
to the firm and also brings reputation to it.
6. Pricing for Market Skimming
the goal of many firm is to maximum
profit at the shortest time (high profit margin).
[Link]
price is used to increase sales volume
at that level which matches the organisation
Expenses.
Methods of Pricing
• A sound pricing policy should be adopted to have
maximum sales revenue.
• In the psat, price were determined by negotiations
between the buyers and sellers
• Now, in the competitive economy price is fixed with
the interaction of demand and supply.
[Link] based pricing
[Link] based pricing
[Link] based pricing
[Link] BASED PRICING
Cost-plus pricing
• Set the price at your production cost, including both cost of
goods and fixed costs at your current volume, plus a certain
profit margin.
• The retail price of a product item includes manufacturers
cost of production plus his gross margin plus wholesalers
gross margin plus retailers gross margin. So this method is
also called “sum-of-margin’s” method.
Target return pricing
• Set your price to achieve a target return-on-investment (ROI).
• Under this method, the selling price is fixed in such a manner
so as to get the desired rate of return on the investment.

Break-Even Pricing
• Break-Even Point is the volume of sales at which the total
sales is equal to the total cost. At this level there is no profit
or no loss
[Link] OR MARKET BASED PRICING

 the firms does not fix a price but charges


what a buyer can pay. Price is fixed by simply
adjusting it to the market condition
 A high price is charged when demand is high
and a low price is fixed when the demand is
low
 Consumers price elasticity and preference are
considered under this policy
3. Competition-oriented pricing:
set prices after a careful consideration of the
competitive price structure
Price of the products of the firm will varry
.
• Discounts • Allowances
 Trade Discounts  Promotional Allowances
 Quantity Discounts  Brokerage Allowances
 Cash Discounts
 Seasonal Discount

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