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PRICE AS AN ELEMENT OF MARKEETING MIX

PRICE AS AN ELEMENT OF MARKEETING MIX. PRICING DECISIONS--. PRICING IS A CRUCIAL ELEMENT AS IT ATTRACTS REVENUES TO THE FIRM. THERE ARE THREE MAJOR CRITERIA INVOLVED IN PRICING DECISIONS— 1. COST(PRICE SHOULD BE COST PLUS INCLUDING DESIRIED PROFITS) 2. COMPETITION (SURVIVAL)

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PRICE AS AN ELEMENT OF MARKEETING MIX

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  1. PRICE AS AN ELEMENT OF MARKEETING MIX

  2. PRICING DECISIONS-- • PRICING IS A CRUCIAL ELEMENT AS IT ATTRACTS REVENUES TO THE FIRM. • THERE ARE THREE MAJOR CRITERIA INVOLVED IN PRICING DECISIONS— • 1. COST(PRICE SHOULD BE COST PLUS INCLUDING DESIRIED PROFITS) • 2. COMPETITION (SURVIVAL) • 3. OBJECTIVE—LONG TERM/SHORT TERM –INCREASING MARKET SHARE, HIGH END IMAGE/BRAND. • PRICING AFFECTS BUYERS’ PERCEPTION OF SERVICE OFFERED. • IF PRICES ARE LOWER CUSTOMERS EXPECTATIONS ARE ALSO LOWER • SPECIAL PRICING FOR IMMEDIACY OF DELIVERY/IMPORTANCE OF DELIVERY(SPEED POST/ICU IN HOSPITAL)

  3. PRICING DECISIONS CONTD.. • BRANDING CAN ALLOW DIFFERENTIATION HENCE PREMIUM PRICING IS POSSIBLE • VALUE IS NOT DETERMINED BY PRICE ALONE BUT THE BUNDLE OF BENEFITS THE CUSTOMER RECEIVES • PACKAGE PRICE– BUNDLE OF DIFFERENT SERVICES AT SPECIAL PRICES– (HOTELS, TRANSPORTATION,TOURS) • PRICING OBJECTIVES— • 1. SURVIVAL (LOWER PROFITABILITY IN PERIOD OF RECESSION/TOUGH COMPETITION) • 2. PROFIT MAXIMIZATION( SKIMMING PRICING—EARLY STAGE OF PRODUCT LIFECYCLE) • 3. SALES MAXIMISATION( DUMPING –FOR PENETRATION) • 4. PRESTIGE– PRODUCT POSITITIONED AS EXCLUSIVE/HIGH END. • 5. RETURN ON INVESTMENT

  4. DEMAND VARIATIONS,CAPACITY CONSTRAINTS • THERE ARE MANY PEAKS AND VALLYES IN DEMAND FOR SERVICES (BASED ON TIME OF DAY/MONTH/SEASON). SERVICE PROVIDER MAY FIND IT DIFFICULT TO CATER TO THE PEAK DEMAND. ON THE OTHER HAND WHEN THERE IS SLACKNESS IN DEMAND THE CAPACITY MAY REMAIN UNDERUTILISED. • SERVICE PROVIDER MAY USE PRICE AS A TOOL TO MANAGE DEMAND—PRICE DISCOUNTS OFFERED DURING VALLEYS—(TELEPHONE CHARGES, MULTIPLEX, HILL STATIONS) • DIFFERENT APPROACH TO PRICING— • EQUIPMENT BASED SERVICES/PEOPLE BASED SERVICES (IF EQUPMENT BASED CAPITAL COSTS ARE MORE HENCE LARGE CUSTOMER BASE NECESSARY—LOW PRICING TO REACH BREAK-EVEN POINT) • DEGREE OF CUSTOMISATION • SEARCH ELEMENTS DOMINANAT/EXPERIENCE ATTRIBUTE DOMINANT—CONCESSION FOR FIRST TIME)

  5. SEGMENTATION AND PRICING • PRICING MUST BE RIGHT FOR THE TARGET SEGMENT • INNOVATIVE PRICING SCHEME FOR YOUR SEGMENT— • EXAMPLE MOBILE INDUSTRY (BSNL PLAN)(TIME SHARING OF RESORTS ON HILL STATIONS/BEACHES)(DAILY WEEKLY TICKET OF BUS SERVICE) • PRICES ARE KNOWN BY DIFFERENT NAMES— • INTEREST RATES(DEPOSITS) * BROKERAGE • RENT * COMMISSION • FARE (AIR/BUS TRAVEL) * TOLL • FEES * PREMIUMS (Insurance) • LOADING (MUTUAL FUND) * HONORARIUM • TICKET * SERVICE CHARGES.

  6. PRICING METHODS • 1. COST PLUS PRICING • 2. RATE OF RETURN PRICING • 3. COMPETITIVE PARITY PRICING • 4. LOSS LEADING PRICING • 5.VALUE BASED PRICING • 6. RELATIONSHIP PRICING • 7. DIFFERENTIATED PRICING

  7. SPECIAL CONSIDERATIONS • CONFUSION BASED PRICING— • MANY FREQUENT CHANGES IN PRICING– CONFUSION IN THE MIND OF CUSTOMEERS-- SOME COMPANIES MAY USE IT AS A STRATEGY-EARNING MORE THAN NORMAL PROFITS FOR SHORT PERIOD—EXAMPLES—CREDIT CARD COMPANIES, MUTUAL FUNDS, BANKS(CHARGES FOR CHEQUE BOOKS,MINIMUM DEPOSIT CHARGES) • PRICING AND CRM • LOYALTY PROGRAMMES (AIRLINES/HOTELS) • PRICING CAN BE SHORT TERM STRATEGY FOR ATTRACTING CUSTOMERS BUT IN LONG TERM SERVICE QUALITY IS MUST.

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