Consumer Behavioour

LECTURE
4
Pricing Products:
Pricing Strategies
CONSUMER BEHAVIOR

Topic.
Pricing strategy
Present by: Waqas Abbasi BM: 1454
Fawad Sheikh BEM-15524
Daniyal Wakeel BM-1453.
Humna Taufeeq BM-1529
komal Kurseed BM-1547
Albara Afzal BM-1530
PRICE-ADJUSTMENT STRATEGIES
Price Adjustment Strategies

Discount & Allowance Segmented

Segmented
Adjusting Prices to Allow
Reducing Prices to AdjustinginPrices
for Differences &
Customers,
Reward Products, oror
Products, Locations.
Locations

Cash Discount Customer

Quantity Discount Product Form

Functional Discount Location

Seasonal Discount Time

EXAMPLE NESTLE PRODUCTS.
1.PRICING OBJECTIVES

 Survival
 Maximum current profit

 Maximum market share

 Maximum market skimming

 Product-quality leadership
Types of Costs

Fixed Costs Variable Costs

(Overhead)
Costs that don’t Costs that do vary
vary with sales or directly with the
production levels. level of production.

Executive Salaries Raw materials

Rent

Total Costs
Sum of the Fixed and Variable Costs for a Given
Level of Production
 Setting Pricing Policy

1. Selecting the pricing

objective

2. Determining demand

3. Estimating costs

4. Analyzing competitors’
costs, prices, and offers

5. Selecting a pricing
method

6. Selecting final price

EXAMPLES: NEW-PRODUCT PRICING

 Market-skimming pricing
 Market-penetration pricing
MARKET-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.
SKIMMING PRODUCT EXAMPLE

1. Skimming Strategy

2. Price Leadership Strategy

3. Product Mix Pricing

Strategy

4. Price adjustment Strategy

MARKET-PENETRATION PRICING

 Setting a low price for a new product in order

to attract a large number of buyers and a
large market share.
PENETRATION EXAMPLE MAGGI

1. Penetration Pricing
Strategy

2. Pull Strategy, higher

margin, packing or
consumption based, value
pricing, ketchup quality
oriented mark-up pricing,
quality discount and high
priced.
EXAMPLES: PRODUCT MIX PRICING

 Product line pricing

 Optional-product pricing

 Captive-product pricing

 By-product pricing

 Cash rebates

 Low-interest,longer warranties,free
maintenance
DISCRIMINATORY PRICING

Customer Segment

Product-form

Location

Time
Psychological Pricing

A $2.19
Most Attractive?

32 oz.

Better Value?

Psychological reason to
price this way?
B $1.99
26 oz.

Assume Equal Quality

GEOGRAPHICAL PRICING

 FOB-origin pricing
 Uniform-delivered pricing

 Zone pricing

 Basing-point pricing

 Freight-absorption pricing
PROMOTIONAL PRICING

 Loss-leader pricing
 Special-event pricing

 Cash rebates

 Low-interest financing

 Longer payment terms

 Warranties & service contracts

 Psychological discounting
3. PRICING CHANGING

 Initiating price cuts

 Initiating price increases
REACTIONS TO PRICE CHANGES

 Customers’ reactions
 Competitor’s reactions
RESPONDING TO COMPETITORS’ PRICE
CHANGES
 Maintain price
 Maintain price and add value

 Reduce price

 Increase price and improve quality

 Launch a low-price fighter line