PRICING AND PRICING

STRATEGIES
Made by: Boco, Ma. Geraldine H.
Submitted to: Ms. Marla B. Sudario

8:30-10:00 TTh PRIMARK

No matter what the state of the economy,
companies should sell value not price.
People don't always buy based on the lowest
price, and no one believes that the lowest price
ever equals the best offer. Customers who buy a
product or service because it's the cheapest are
not loyal.
It produces revenue and is
flexible, meaning that prices
change quickly from time to
time.
It also determines the firm's
market share and profitability.

WHAT IS PRICE?

It is the amount of money charged for a product

or service, the sum of the values that customers
exchange for the benefits of having or using the
product or service.
FACTORS TO CONSIDER WHEN SETTING
PRICES
Other internal and external
Customer considerations
perceptions Product costs
of value Marketing strategy, objectives,
and mix

Price ceiling Nature of the market and demand Price floor

No demand Competitor's strategies and prices No profits
above this price below this
price

Cost-based pricing
Design a good Determine Set price based Convince buyers of
Product product cost on cost product's value

Value-based pricing
Assess customer Set target price to match Design product to
Determine costs that can deliver designed
needs and value customer perceived be incurred
perceptions value value at target price
2 types of value-based pricing
1) Good-Value Pricing- offering just the
right combination of quality and good
service at a fair price.
1) Value-Added Pricing- attaching
value-added features and services to
differentiate a company's offers and
to support charging higher prices
MAJOR PRICING
STRATEGIES
Cost-based pricing
Involves setting prices based on the
costs for producing, distributing, and
selling the product plus a fair rate of
return for its effort and risk.
TYPES OF COSTS
1) FIXED COSTS (Overhead)
-costs that do not vary with production or sales
level. (ex. Rent bills)
2) VARIABLE COSTS
-vary directly with the level of production.
TOTAL COSTS
-the sum of the fixed and variable costs for any
given level of production.
 COST-PLUS PRICING BREAK-EVEN VOLUME = FIXED COST
PRICE – VARIABLE COST
The simplest pricing method also
known as markup pricing- adding
a markup to the cost of the
product Also known as target return pricing,
setting price to break even on the
UNIT COST = VARIABLE COST + FIXED COST costs of making and marketing a
UNIT SALES product or setting price to make a
target return.

MARKUP PRICE = UNIT COST

(1- desired return on sales) BREAK-EVEN PRICING

COMPETITON-BASED PRICING Setting prices based on

competitors' strategies,
3 GENERAL
prices, costs and market PRICING
offerings. APPROACHE
S
OTHER INTERNAL AND EXTERNAL
CONSIDERATIONS AFFECTING PRICE
DECISIONS
INTERNAL
Target Costing –
pricing that starts
1) Overall Marketing Strategy,
with an ideal selling
Objectives and Mix
price and then
2) Organizational Considerations
targets costs that
will ensure that the
EXTERNAL
price is met.
1) Nature of the market and demand
2) Other environmental factors
(government, reactions of resellers)
Management
must decide
who within the
organization
should set
prices.
PRICING IN
Determines changes in demand with unit change in
DIFFERENT TYPES price.
OF MARKETS
If there is little or no change in demand, it is said to
be price inelastic.
1) Pure competition- sellers in these markets
do not spend much time on marketing
If there is significant change in demand, then it is
strategy.
said to be price elastic.
2) Monopolistic competition- consists of many PRICE ELASTICITY = % change in quantity demanded
buyers and sellers who trade over a range OF DEMAND % change in price
of prices rather than a single market price.

3) Oligopolistic competition- consists of a few

sellers who are highly sensitive to each
other's pricing and marketing strategies. PRICE ELASTICITY
4) Pure monopoly- consists of one seller.
NEW-PRODUCT PRICING STRATEGIES
Pricing new
products is
1) MARKET-SKIMMING PRICING Conditions: very
Also known as PRICE SKIMMING, setting a high 1) The product's quality must support challenging
price for a new product to skim maximum revenues its higher price and enough buyers
layer by layer from the segments willing to pay the must want the product at that price.
high price; the company makes fewer but more 2) The costs of producing a smaller
profitable sales. volume cannot be so high that they
cancel the advantage of charging
1) MARKET-PENETRATION PRICING more.
Setting a low price for a new product to penetrate 3) Competitors should not be able to
the market quickly and deeply and to attract a large enter the market easily and
number of buyers and a large market share. undercut the high price.

Conditions:
1) The market must be highly price sensitive so that a low
price produces more market growth.
2) Production and distribution costs must decrease as sales
volume increases.
3) The low price must help keep out the competition, and the
penetration pricer must maintain its low- price position.
Otherwise, the price advantage may be only temporary.
PRODUCT MIX PRICING STRATEGIES
PRICE ADJUSTMENTS STRATEGIES
PRICE CHANGES

1) PRICE CUTS
-excess capacity When and how should a
-falling demand; strong price competition or company change its
weakened economy prices? What if costs rise,
-attempts to dominate through lower costs. putting the squeeze on
2) PRICE INCREASES profits? What if the
-when done successfully it improves profits but economy sags, and the
the company should avoid being perceived as a customers become more
price gouger. price-sensitive? Or what
Techniques: -maintain a sense of fairness when if a major competitor
it comes to increasing prices. raises or drops its prices?
- Consider ways to meet higher costs or
demands without raising prices.

BUYER'S COMPETITOR'
REACTIONS S REACTIONS
RESPONDI
NG TO
PRICE
CHANGES
PUBLIC POLICY AND MARKETING

PRICING
WITHIN
CHANNE
LS

PRICING
ACROSS
CHANNEL
S
END OF MEMBERS:
PRESEN
TATION Boco, Geraldine
Urbano, Ruejen
Go, Darlene
Navidad, Rachel
Omangay, Ma. Kristine Claire T.
Pundavela, Mikhaella Faye D.
Ala, Jovy Mae
Casilan, Jesalyn
Horfilla, Sean Rey A.
Mendaño, Maryan
Monecillo, Micah D.
Taño, Germelinda
For the past two consecutive
months, Healthy Lifestyle
Magazine has decreased its
sales. When the CEO received
the report, he immediately
sent an email blast to all
department heads that they
should have a meeting on
Friday. As indicated on the
email, he required that each
department should run an
assessment as to how they
have affected the decrease in
sales and at the same time
come up with a proposal on
how they can improve to
increase their monthly sales.
The marketing team announced
that they will be having a
meeting in preparation for the
proposal they need to present on
Friday.
Everything has been wrapped up for
all the teams. Friday has finally come
and the meeting shall be held. There
are two teams who will be
presenting their proposals and the
best proposal shall be chosen to
improve the sales performance
which tremendously decreased over
the past two months.