What is pricing ? what are the factors affecting pricing?

1. Definition
•Price
The amount of money charged for a
product or service, or the sum of the
values that consumers exchange for the
benefits of having or using the product
or service.

2. Factors Affecting Pricing of a Product

3. Internal and External Factors Affect Prices

4. Internal Factors Affecting Pricing Decisions

5. Marketing Objectives
• The company must select its market clearly
and then marketing mix strategy.
• On the other hand the company must be
clear about its objectives. If the company
objectives are clear, it will be easy to decide
the price.

6. Marketing
Objectives
Survival
Low Prices to Cover Variable Costs and
Some Fixed Costs to Stay in Business.
Current Profit Maximization
Choose the Price that Produces
the Maximum Current Profit, Etc.
Market Share Leadership
Low as Possible Prices to Become
the Market Share Leader.
Product Quality Leadership
High Prices to Cover Higher
Performance Quality and R & D.

7. Marketing Strategy Mix
A company achieves the objective by price,
which is one of the tools of marketing mix.
The price, which is selected, must be related
with product design, distribution and
promotion decision.

8. Marketing Mix Strategy

9. Marketing-Mix
Strategy
Product Design
Distribution
Channels
Promotion
Costs
Non-Price
Factors
Companies Will Consider Price Along With All the Other Marketing-Mix Elements
When Developing the Marketing Program.
Price Must be Coordinated With:
Marketing Mix Variables Affecting Pricing Decisions

10. Cost of the Product
• Cost is related closely with price because to
select the price it will include cost of
distribution, production and all the other
costs on product. If the company cost of
production is high, it cannot set suitable
price. But if the cost of production is not
high, can set suitable prices.

11. Total Costs
Sum of the Fixed and Variable Costs for a Given
Level of Production
Fixed Costs
(Overhead)
Costs that don’t
vary with sales or
production levels.
Executive Salaries
Rent
Insurance
Variable Costs
Costs that do vary
directly with the
level of production.
Raw Materials
Costs, Effecting Pricing

12. Organization
the duty of management that who will set the
price within the organization.
In large organizations price setting authority is
given to product line manager.
 In industrial organizations it is allowed to
salespersons to interact with customers to set the
price in specific range.
In small organization the top management decides
the pricing structure.

13. External Factors Affecting
Pricing Decisions

14. The Market and Demand
• To set the price the marketers should have
complete knowledge about the relationship
between market and demand.

15. Features of perfect competition
• Large no of sellers & buyers number
• Homogeneous products perfectly
• Free entry and exit
• Perfect knowledge of price cost (no control over
price)
• Perfectly price elastic demand imperfect
competition
• Price is determined by demand and supply

16. Monopolistic Competition
• Large no of sellers and buyers
• Differentiated products which are close
substitute
• Free entry but firms can produce only close
substitutes
• Some control our price
• Less than perfectly price elastic demand

17. Features of Monopoly
o Single firm
o Perfectly differentiated product without
close substitute
o Very strong barriers to entry
o Extreme control over price
o Near to in elastic price elasticity of demand

18. General economic conditions
• In a period of depression ,the
product price may have to be kept
at a low level . Reverse may be the
case in case of a boom period.

19. Competitors
• An org. has also to keep in mind the strategy
of its competitors while fixing the price of its
products.

20. Public image
The firm may not charge price for its
product even under most favorable
circumstances since it may not like to
get its image spoiled in the general
public.

21. Gov. policy

22. Nature of the product

23. Status symbol