Methods of pricing
-
Upload
pavankumar-h-k -
Category
Marketing
-
view
568 -
download
0
Transcript of Methods of pricing
![Page 1: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/1.jpg)
METHODS OF PRICING
Group 10 | Marketing Management II
26 November 2015
Submitted By-Rohit Kawade (133)Simmy S Nigam(135)Swagat debbarma(137)Debojyoti Sanyal(141)Anurag Sarode(143)Abhishek Tigga (145)
![Page 2: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/2.jpg)
Pricing Methods1. Mark Up Pricing2. Absorption cost3. Target- Return Pricing4. Perceived Value Pricing5. Going Rate Pricing6. Auction- Type Pricing
COST ORIENTED
MARKET ORIENTED
![Page 3: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/3.jpg)
Mark Up Pricing• The selling price is fixed by adding Mark-up or Margin to its cost.• Usually used by: Distributers, Marketing firms etc..• Slower the turnaround of the product larger the margin and vice
versa.• Mark Ups are high on seasonal items, speciality items, demand
inelastic items etc.• Mark up price = unit cost /( 1- Desired return on sales )
![Page 4: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/4.jpg)
How to Calculate • A FMCG company sells a bar of soap to retailer .• Unit Cost= VC+FC • VC per unit = Rs.10, Total FC= Rs. 300000• Number of units produced= 50000• Unit cost= 10+ (300000/50000)= Rs 16• Now manufacturer wants to earn 20% mark up on sales• Mark up price = unit cost/(1- desired return on sales)= 16/(1-0.2)=Rs20
![Page 5: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/5.jpg)
Example
Demand inelastic item Seasonal Items
![Page 6: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/6.jpg)
Example
Cost= US$ 0.08Price= US$1.08Mark Up= 1,250%
Jewellery
![Page 7: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/7.jpg)
Absorption Cost Pricing• Mainly used by manufacturing firms.• It uses standard costing techniques.• It includes : Fixed cost Variable cost Selling and administering costAdvertisement cost• It is also known as full cost pricing.
+ PROFIT
![Page 8: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/8.jpg)
ExampleDelhi - 5.04lakhsChennai - 5.44lakhsHydrabad - 5.40lakhsMumbai - 5.37lakhsBangalore - 5.59lakhsPune - 5.24lakhs
![Page 9: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/9.jpg)
Target –Return Pricing• Similar to Absorption cost pricing.• The difference is in fixing the profit margin.• The profit margin/ mark up is fixed by considering the ROI.• Firm will have return objectives, like 5% of invested capital, or 10% of
sales revenue.• Then you arrange your price structure so as to achieve these target
rates of return.• Market leaders or monopolists uses this pricing strategy.
![Page 10: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/10.jpg)
How to calculate• Investment of a pen manufacturer = Rs1million • Total sales 50000• Expected ROI= 20%, Unit cost of a pen =Rs 16• Target return price= Unit Cost +( Desired return * Invested capital)/ Unit sales• TRP= 16+(0.2* 1000000)/50000 = Rs 20
![Page 11: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/11.jpg)
Example
Market Leaders ensuring target sales
![Page 12: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/12.jpg)
Example
ITC Cigarettes
![Page 13: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/13.jpg)
Perceived Value Pricing• Pricing on Perception• To increase prices without damaging customer relationships is by
adding to the perceived value of your product or service
![Page 14: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/14.jpg)
Examples
![Page 15: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/15.jpg)
Examples
John Deere Tractor
Perceived valueDurabilityReliabilityServiceLonger warranty
![Page 16: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/16.jpg)
Examples
![Page 17: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/17.jpg)
Going Rate Pricing• Setting a price based on market price basis.• Used for homogenous products/ Oligopolistic market• Costs are difficult to measure/competitive response is uncertain
![Page 18: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/18.jpg)
Competitors ‘parity method
Premium pricing
Discount pricing
![Page 19: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/19.jpg)
Examples
Telecom Industry Airlines Industry
![Page 20: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/20.jpg)
Examples
Banking Industry Electronic goods
![Page 21: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/21.jpg)
Auction Type Pricing• electronic market places are selling a diverse range of products to dispose of
inventories and goods• Three major types of auctions-English Auctions (one seller many buyers)Dutch auctions (one seller many buyers and vice versa)Sealed bid Auctions (supplier submit only 1 bid) Example- Government Biddings
![Page 22: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/22.jpg)
Examples of English Auctions
![Page 23: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/23.jpg)
Examples of Dutch Auctions
1 buyer many sellers
Google IPO Bidding1 seller many buyers
![Page 24: Methods of pricing](https://reader036.fdocuments.in/reader036/viewer/2022062904/587808d11a28ab971e8b5259/html5/thumbnails/24.jpg)
Thank You!!!