Pricing Theories

by
Balaji K
 Overview
 Dimensions of Pricing
 Objectives of Pricing
 Pricing Mechanism
 Pricing Techniques
 Pricing Methods and Problems
 Transfer Pricing
 Pricing Policies

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Dimensions of Pricing

 Competitive Dimension
 Time Dimension
 Geographic Dimension
 Dimension on the Basis of Business
 Marketing Mix
 Product Life Cycle

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 Objectives of Pricing
 Price Stabilisation
 Maintenance of Market Share
 Target return on Capital
 Prevention of Competition(Monopoly Power)
 Ethical Pricing Policy
 Good Return for Product Line(Multi Product firm
having Common Costs
 Liquidity(Customers with Prompt Payment)

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 Pricing Mechanism
 Selection of Market Targeted
 Brand Image
 Determination of Marketing Mix
 Selection of Specific Techniques
 Selection of Pricing Strategy
 Setting up Specific Price

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Framing a Pricing Policy
 Seven Main Parties are to be Considered
 They are
 1)Sales Agents
 2)Existing Competitors
 3)Potential Competitors
 4)Consumers of the Product
 5)Middlemen 6)Suppliers and 7)Govt

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Pricing Techniques
1)Profit Maximisation Rule(MR =MC) or MR
> MC
2)Demand related Pricing Technique
a)Perceived Value Pricing
b)Demand Differential Pricing
3)Cost Related Pricing
a)Suggested Retail Pricing
b)Incremental Cost Pricing

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Pricing Techniques Contnd.,
3 )c) Target Pricing
d) Cost Plus Pricing
4)Competition Oriented Pricing
a)Pricing in Competitive Vs Monopoly
environment
b)Pricing in Established Markets
c)Going Rate Pricing
d)Sealed Bid Pricing

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Pricing Methods

1) Skimming Pricing
2) Penetrating Pricing

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Problems in Pricing
Transfer Pricing
Differentiated Pricing or Price
Discrimination
Dumping
Solution:
Antidumping Duty

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 k Y ou
Th a n

Complements (-) vs Substitutes (+)

defined by sign of cross price elasticity

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