PRICING STRATEGYCHAPTER 8Introduction to marketing
PRICING OBJECTIVES SurvivalMaximize profitTarget returnMarket shareStatus quoNon prove competition
SELECTING A PRICING POLICY1. BREAK EVEN ANALYSIS-Is a comparison of alternative cost and revenueestimates in order to determine acceptability of eachprice.Break even point is the point where company’s salesrevenue equal to its production cost.Two types of cost must be understood that are fixedcost and variables cost.Computing break even point involve three majorcomponents that are, total fixed cost, selling priceper unit and variable cost per unit.
BEP TOTAL FIXED COSTSELLING PRICE- VARIABLE COST
2. Mark-up Pricing- is the difference between the selling priceof a good and its cost to the business.Example:Cost RM 1.40Mark-up 30%Selling price ?
COMPETITION ORIENTED PRICING Matching competition Pricing below competition Pricing above competition Sealed bid pricing / tenders
THE PRICING SETTING DECISIONPROCESS1. Selecting price objectives2. Assessment of target market’s evaluation ofprice and its ability to purchase3. Determine demand4. Analysis of demand, cost and profitrelationships5. Analyze competitor’s price6. Select a pricing policy7. Development of pricing strategy/method
SKIMMING PRICING Is the technique of selling high price to skimoff strongest demand in the marketplace. This strategy is often only short range. Example:PlaystationFlat screen tv
PENETRATION PRICING Is the strategy employing a low price that iscompetitive and designed both to stimulatedemand and to discourage competition.
SLIDING PRICE STRATEGY Is a method of moving prices in relation todemand. This strategy is combination of skimming andpenetration strategy.
ODD PRICING Is setting of a price just below the roundnumber. Based on belief that customers perceive theodd price much lower than round numberprice. Example: RM1.99 rather than RM2.00
PRICING LINING Is the process of offering merchandise inseveral different price ranges. Quite often it is three ranges of low, mediumand high. Example:
GEOGRAPHIC PRICING Is a technique of charging customers based onwhere they live. This pricing strategy passes the transportationcost of goods to buyers Example:
DISCOUNT Is reduction in the list price. Another strategy to encourage people to buyproduct or service. Example:– T-shirts price RM160– Discount 70%– How much new price?