PRICING

Marketing In IT

1. 1 Understand the definition of pricing 2. 2 Identify internal factors affecting pricing decisions 3. 3 Identify external factors affecting pricing decisions 4 Explain new product pricing strategies 4. 5 Identify pricing objectives for nonprofit organizations 5.

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All profit organizations and many not for profit organizations must set prices on their products and services. Price goes by many names: Rent car & house Fee tuition and dentist Fare bus and airlines Premium insurance Wage, Salary and Commission

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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. Price is the only element in marketing mix that produces revenue all other elements represent costs. Price is also the most flexible because it can be changed quickly. At the same time, pricing and price competition is the number one problem facing many marketing executives.

TO CONSIDER WHEN SETTING PRICING

INTERNAL FACTORS
Marketing Objectives Marketing Mix Strategies Cost Organizations Consideration

EXTERNAL FACTORS
Nature of the market and demand Competition Other (economy, resellers, government)

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1. Marketing Objectives
Survival
Companies set survival as their major objective if they want to keep a plant going. Companies may set a low price, hoping to increase demand. However, in the long run, the firm must learn how to add value that consumers will pay for or face extinction.

Current profit maximization

Many companies use current profit maximization as their pricing goal. They estimate what demand and costs will be at different prices and choose the price that will produce the maximum current profit, cash flow, or return on investment.

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1. Marketing Objectives
Market share leadership
Other companies want to obtain market share leadership. To become the market share leader, these firms set prices as low as possible.

Product quality leadership

A company might decide that it wants to achieve product quality leadership. This normally calls for charging a high price to cover higher performance quality and the high cost of R&D.

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2. Marketing Mix Strategies
Price decisions must be coordinated with product design, quality, distribution, and promotion decisions to form a consistent and effective marketing program. For example, the decision to position on high performance quality will mean that the seller must charge a higher price to cover higher costs.

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3. Cost
Costs set the floor for the price that a company can charge. The company wants to charge a price that both covers all its costs for producing, distributing, and selling the product and delivers a fair rate of return for its effort and risk. A companys cost may be an important element in its pricing strategy.
Many Asian companies work to become the low cost producers in their industries. Companies with lower costs can set lower prices that result in grater sales and profit.

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3. Cost
Type of Cost:
Fixed Costs: Costs that do not vary with production or sales level. For example, a company must pay each months bill for rent, interest, and salaries. Variable Costs. Costs that vary directly with the level of production. For example cost of computer chips, wire and other inputs. Total Costs. The sum of the fixed and variable costs for any given level of production.

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4. Organizational Considerations
Management must decide who within the company should set prices. In small companies, prices are often set by top management. In large companies, pricing is handled by divisional or product line managers. In industries, companies often have a pricing department to set the best prices or help others in setting them. This department reports to marketing department or top management. Others who have an influence on pricing include sales managers, production managers, finance managers and accountants.

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1. Nature of the market and demand
Marketer has to know the four types of market :
Pure Competition Monopolistic Competition Oligopolistic Competition Pure Monopoly

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2. Competitors Cost, Prices and Offers
Another external factor affecting the companys pricing decisions is competitors costs and prices and possible competitor reactions to the companys own pricing moves. For example, a consumer who is considering the purchase of Canon camera will evaluate and compare products made by Nikon, Minolta, and others.

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3. Others
Economic conditions strong impact on the firms pricing strategies. Economic factors such as boom or recession, inflation, and interest rates affect the cost of producing and customer perception of price and value. Government
Social

NEW PRODUCT PRICING STRATEGIES

SKIMMING PRICING
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. For example Sony, introduce high definition television for Japanese market at very high price. It because they know their product has quality and image.

4 NEW PRODUCT PRICING STRATEGIES

PENETRATION PRICING
Setting a low price for a new product in order to attract a large number of buyers and large market share. Many Asian businesses like Japanese, Korean, Taiwan and Chinese companies, employ penetrate pricing when entering overseas markets. For example, Malaysias national car company, Proton, has traditionally enjoyed a low-price advantage at homer over foreign competitors that had to pay high import taxes.

4 NEW PRODUCT PRICING STRATEGIES

VALUE PRICING
Price set in accordance with customer perceptions about the value of the product/service
Examples include status products/exclusive products

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MARKETING An, or return on investment organization that exists
to achieve some goal other than the usual business goals of profit, market share

Theater s
Private Museum s
Governme nt

Others NonGovernme nt

School s

Mosqu e

MARKETING ACTIVITIES

Identify Desired Customers

Specify Objectives

Develop, manage, eliminate programs/services

Set prices

Schedule events

Communicate through advertising/PR