Price Policy Overview Pricing Policy Price Structure Pricing

Price Policy Overview Pricing Policy Price Structure Pricing Strategy The pricing policy is a price fixing Before the product is introduced The pricing strategy should decision making method for our into market, we must decide how lead to buying incentives products, a marketing strategy as part the price will be structured (using through a targeted setting of of the marketing mix. various price strategies). the sales price.

Price Policy Overview PRICING POLICY PRODUCT POLICY A price fixing decision-making method for Product policy is concerned with defining products/services. A marketing strategy (as the type, volume and timing of products a part of the marketing mix). DISTRIBUTION POLICY company offers for sale. COMMUNICATION POLICY This or sales policy concerns the channels selected The purpose of the communication policy is to to transfer ownership and transport a product from ensure that the company information disclosed its producer to its consumer. to the investing public.

Role of Pricing Policy STRONGEST MARKETING WEAPON STRONGEST MOTIVATOR FOR PROFIT Customers and competitors react The price directly determines the drastically to price changes. revenues of the company. Prices are easy to communicate. The deductible amount has influence (the price is raised, customers buy less). Awaken the interest of customers to aim The indirectly affects costs depending for finding the most affordable purchase. on the sales quantity,

Importance of Pricing Policy PRICE LEVEL 05 PRICING POLICY PRICE COMM. PRICE SETTING VALUE ADDED 01 02 Units, controls, price conditions Economic value, product packaging and segmentation 03 04 Pricing methods, negotiation tactics Mediation of Value Pricing

PROMOTIONAL PRICING STRATEGY (LOW PRICE STRATEGY) Fixed Price Strategy Price is low in the long-term. Pricing image Price is higher than average is developed too. set for a price. Problem : customers change quickly as soon as they find cheaper deals (suppliers respond with price elasticity) The product needs a very good quality or high image to justify price. Example : supermarket, gas Example : automobiles, clothing and stations etc. cosmetic companies. PREMIUM PRICING STRATEGY (HIGH PRICE STRATEGY)

ABSORPTION STRATEGY PENETRATION STRATEGY The organization sets an initial high price and then slowly lowers the Here the organization sets a low price to increase sales and price to make the product available to a wider market. The objective is market share. Once a market share has been captured the to skim the profit of the market layer by layer. firm may well the increase its price. Price Time

Pricing for Profit A) Addressing the Trade-off between Margin & Volume Deviation from the Target Market Share Profit = Market Share X Market Volume X Low High SKIM PROTECT OPTIMIZE GAIN Margin Price - Cost Over Proportional Share Under Proportional Share

Pricing for Profit C) Assuring a Disciplined Process for Pricing CEO MARKETING & SALES CONTROLLE R SALES PEOPLE PRICE OFFICER Setting strategic pricing targets/ roadmaps A(R) C I C Fixing the price guideline (product & customer prices) A(R) C I C Deciding on tactical price moves A(R) C I C Communicating A(R) I I I A(R) C I A C R C A(R) I R I Approving prices and terms Implementing prices Gathering market and competitive price data Controlling prices I I R A(R) Providing reports and database for price decisions I I C(R) A/R R = Responsible “Doer” A = Accountable “in charge of” C = Contributing “Add value“ I = Informed “FYI“

Factors for Price Determination Internal and External Factors INTERNAL FACTORS Marketing Objective Marketing Mix Cost Organizational Consideration EXTERNAL FACTORS Market & Buyer’s State (define mini. & max. price) Strong Retail Chains Competitions

Implementation - Pricing Tips (Non-binding sales price) Is Example : 7. 99 Dollar (Opposite of price setting) Using recommended by the dealer/ Instead of 8. 00 Dollar better quality to be set apart manufacturer as the retail price. basic price structure followed from competitors. EIA OBSERVATION OPTIMAL PRICE QUALITY LEADERSHIP STRUCTURE SPECIAL OFFERS PRICE SETTING Reasonable discounts that Always undercutting the raise no suspicion from the competition with a clear concept customer. as price setter.

Additional Charts 100% 50% 70% Product Users Before the product is introduced into market, we must decide how the price will be structured (using various price strategies).

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