This document discusses pricing strategies for marketing financial products. It begins by defining price as part of the marketing mix and as a way for businesses to generate revenue. It then discusses various factors that affect pricing like costs, risks, competition and consumer demand. The document outlines several pricing objectives like profit, market share, and cash flow. It also covers different pricing strategies such as penetration pricing, product bundling, cost-plus pricing, and relationship pricing. It concludes with a brief overview of break-even analysis and how it can help with pricing decisions.

1. 1
Marketing of
Financial
Products
1
MoFP for
TKW’s
Lecture – 6
Parveen Sharma

2. 2
Contents
Marketing Mix: Price
 The Concept
 Objective of Pricing
 Factors Affecting Pricing
 Pricing Strategies
 Pricing Strategy & PLC
 Relationship Pricing
 Break-even Analysis
MoFP for
TKW’s
2

3. 3
NN
Marketing Mix: Price
MoFP for
TKW’s
Pricing decisions need to balance a business’s need to make a profit,
with the market’s value perception (i.e. what the market is prepared to
pay).
If the price is too high, customers won’t buy the products; if the price
is too low, there is a risk that the business will not be able to generate
enough profit to breakeven.
"Price is what you pay. Value is what you get."
- Warren Buffett

4. 4
 “P” in marketing mix generating revenue
NN
Marketing Mix: Price
MoFP for
TKW’s
 Price = Revenue
 Product
 Place = Cost
 Promotion
 Complex process determine value consumers will exchange for offering
 Price of financial services is generally expressed in terms of interest
rates, fees, brokerages, commissions and premiums.

5. 5
NN
Marketing Mix: Price
MoFP for
TKW’s
Pricing of Insurance products
The formulation of pricing strategies
becomes significant with the viewpoint of
influencing the target market or prospects. To
be more specific in the Indian context where
the disposable income in the hands of
prospects is found low due to inflation, it is
pertinent that the insurance organizations
adopt such a strategy for pricing that makes it
a motivational tool & paves the ways for
increasing the insurance business. Of course,
a motivational pricing strategy is required to
be given due weightage.

6. 6
 Price is very important part of Marketing Mix as it affects…
…whether people can afford the product and how quickly sales will
grow
…how competitively it is priced compared to rival products
…the product’s image – high price can mean high quality
Price = Cost + Perceived Value
 In addition to price of financial services consumers might also be
motivated by other factors such as security, piece of mind, prestige and
wealth.
NN
Marketing Mix: Price
MoFP for
TKW’s

7. 7
NN
Marketing Mix: Price
MoFP for
TKW’s

8. 8
 Profit
 Survival
 Market Share
 Cash Flow
 Status Quo
 Product Quality
 Communicating Image
NN
Objective of Pricing
MoFP for
TKW’s
Marketing Mix: Price

9. NN
9 MoFP for
TKW’s
Marketing Mix - Price
Factors affecting pricing
Company Objective
Component of Marketing Mix
Costs
Risks
Share holders
Consumers
Competition
Legal & Regulatory
Pricing
Internal Factors External Factors

10. 10
NN
Pricing Strategies
MoFP for
TKW’s
 Discriminating Pricing
First degree
different prices to each customer depending upon their
intensity of demand
Second degree
Lower prices for buyers/investor of a larger volume
Third degree
 Customer groups – student, senior citizen
 Image pricing
 Channel
 Location
 Time

11. 11
NN
Pricing Strategies
MoFP for
TKW’s
 Product-mix pricing
Product line pricing – Setting price steps between various products
in a product line
Captive-product pricing – main product at lower price, ancillary
product at higher price
Two-part pricing – split into fixed and variable component
By-product pricing – by-products obtained in production of other
products
Product-bundling pricing

12. 12
NN
Pricing Strategies
MoFP for
TKW’s
 Product-Bundling pricing
Reliance SIP Insure provides free life
insurance cover to investors at no
extra cost.
In the unfortunate event of the
demise of an investor during the
tenure of the SIP, the insurance cover
will take care of the unpaid
installments

13. 13
Pricing will depend on type of market i.e.
if the market is exclusive or advanced , the consumers may expect
high prices
Price Skimming is common
if it is mass market where similar products are sold to large number
of customers then a low or Penetration Pricing might be used
NN
MoFP for
TKW’s
Penetration Pricing: Setting a price at
lower level to gain greater market share
Price Skimming: Setting price higher
initially to create higher image
Pricing Strategies

14. 14
If the market is very competitive and business is to grow by increasing
sales, prices may have to be reduced
Prices may need to be equal or below competitors selling very similar
products
This is called Competitive Pricing
NN
Pricing Strategies
MoFP for
TKW’s

15. 15
 Growing business needs profits to invests back into the business
 Prices of products have to cover all costs if profits are to be made
 Adding a profit mark up to the unit costs will achieve this
 This is called Cost-plus Pricing
NN
MoFP for
TKW’s
Cost-plus Pricing: Setting price at the
unit cost plus a percentage mark up
Pricing Strategies

16. 16
Loss Leader Pricing
Making a deliberate loss on a product which will be cancelled out by
profit made on other items
It is widely used in two ways
Selling vanila products at lower cost
Attract customers to buy these products
And then cross-sell
NN
MoFP for
TKW’s
Loss Leader Pricing: Setting price below
/at hoping to gain other profitable sales
Pricing Strategies

17. 17
NN
Pricing Strategies
MoFP for
TKW’s

18. 18
NN
Pricing Strategy & Product Life Cycle
MoFP for
TKW’s
Introduction
Sales
Costs
Profits
Marketing
Objective
Price
Strategy
Promotion/
Ads
Low sales
High
Negative
Increasing
Awareness
Penetration/
Skimming
Heavy
promotions
Rapidly Rising
Average
Increasing
Increase Market
share
Penetration if
new
Awareness &
Interest
Growth
Peak Sales
Low cost
High & declining
Inc profit,
defending share
Competition
pricing
Differences &
benefits
Maturity
Declining sales
Low cost
Declining profits
Reduce costs &
Milk brand
Reduce
Prices
For customer
retention
Decline

19. 19
 Relationship Pricing: Often products are priced so that customers are
encouraged to much of their business with one institution.
Relationship pricing also involves building extras into the product to add
value to the customer and differentiate
Lot of Small & big industrial customers are influenced by FI’s having
expertise in developing relationship.
LGD Marketing
Lunch
Golf
Dinner
NN
Pricing – Relationship Pricing
MoFP for
TKW’s
Retaining your customers is a lot less expensive than getting new
ones. So, how do you keep them coming back for more?

20. NN
20 MoFP for
TKW’s
Break-even Analysis
 Break-even Volume = Fixed cost/(Price – Variable cost)
Break-even chart for determining Target Return Price and Break-even volume
Price per unit = Rs 100 AVC = Rs 60 Fixed cost = Rs 120000
BEP(in units) = 120000/(100 – 60) = 3000 units
 Breakeven analysis is an aid in making pricing decisions.

21. 21 MoFP for
TKW’s
NN
? ueriesQ
21
Contact me @ +91-9050050288
or
Email to parveen_72@yahoo.in

22. 22
NN
Term for the Lecture
22 MoFP for
TKW’s
 Mark up Pricing
 Absorption cost Pricing
 Target Return Pricing
 Marginal cost Pricing
 Perceived Value Pricing
 Value Pricing
 Going Rate Pricing
 Auction Type Pricing
 Group Pricing

23. 23
Thank
You
MoFP for
TKW’s
23