Introduction to Pricing Strategy PDF

# Introduction to Pricing Strategy ## **By:** Dr. Roxanne Velasquez-Selmo ### Dr. Roxanne V. Selmo **Educational Background:** - Graduate of: - BS Accountancy - Master in Business Administration - Doctor in Business Administration **Professional Experience:** - Operations Manage...

# Introduction to Pricing Strategy ## **By:** Dr. Roxanne Velasquez-Selmo ### Dr. Roxanne V. Selmo **Educational Background:** - Graduate of: - BS Accountancy - Master in Business Administration - Doctor in Business Administration **Professional Experience:** - Operations Manager-Aigon Capital Group - Part Time Professor-Polytechnic University of the Philippines - Part Time Professor - La Salle St Benilde ## Pricing The dollar sign with wings image illustrates the concept of pricing. The dollar sign represents the monetary value, and the wings signify the potential for growth and success. - Price is not just a number on a tag or an item. - Traditionally, price has been the major determinant of a buyer’s choice. - Non-price factors have become quite important in the last few decades; however, price still remains an important factor. ## Factors Influencing Pricing Decisions - Objective of the company - Characteristics of the product - Cost of production - Goodwill of the firm - Product life cycle - Promotion of products - Product line - Credit policy ## Pricing Objectives - Profit maximisation - Target return on investment - Pricing stabilisation - Prevent competition - Sales promotion - Expedite cash collections - Paying capacity of consumers ## Pricing Methods - **Markup pricing**: A standard markup is added to the product’s cost. Markups are generally higher on seasonal items. - **Target-return pricing**: Determines the price that would yield its target return on investment (ROI). - **Perceived value pricing**: The price is based on the customer’s perceived value. The company must deliver the value promised. Advertising and sales force are used to enhance the image. - **Value Pricing**: Companies win loyal customers by charging a fairly low price for a high-quality offering. Examples include Big Bazaar and Bata. - **Going-Rate Pricing**: The firm bases its price largely on competitors’ prices. This is often described as “following the leader.” - **Auction-Type Pricing**: - **English auctions**: Use ascending bids. - **Dutch auctions**: Use descending bids. - **Sealed-bid auction**: Where bids are submitted in closed envelopes. - **Geographic pricing**: Applicable mainly to exports. The cost of shipping goods is considered. ## Physical Distribution - It means an operation/activity or a series of operations that physically bring goods manufactured into the hands of the final consumer/user. ## Channel Decisions - Marketing channels are also called trade or distributive channels. - A channel of distribution for a product is the route taken by the product as it moves from the producer to the ultimate consumer or individual user. ## Functions and Services Of Marketing Channels - Facilitate movement of goods - Promotes large-scale production of goods - Economical distribution - Creates utility - Risk taking - Facilitates introduction of new products ## Marketing Channels For Consumer Goods - Manufacturer - Wholesaler - Retailer - Consumer - Manufacturer - Sole selling agent - Wholesaler - Retailer - Consumer - Manufacturer - His own depots- Retailer - Consumer - Manufacturer - Retailer - Consumer - Manufacturer - His chain shop - Consumer - Manufacturer - Consumer ## Promotion Mix A diagram shows a circle labeled “Marketing Communications Mix” which is surrounded by 6 smaller circles labeled “Advertising”, “Personal Selling”, “Public Relations”, “Direct Marketing”, and “Sales Promotion”. This explains that promotion of a product includes a mixture of different styles of advertising.