Wide spectrum of consumers-Very

Affluent to Very Poor

Least understood of all financial
decisions
Influenced by front line people
Considerable discretion at lower levels
Monitor behaviour using technology
Tailormade quotations based on past
purchase behaviour
Special Prices to designated customers
Demand
Supply
Competitor Offerings
Marketing Mix Factors
Environmental Considerations
Price Bands
Reference Prices
Price Quality Inferences
Price Cues
Special Offers
Survival
Maximum Current Profit
Maximum Market Share
Maximum Market Skimming
Product-Quality Leadership

Purchase is infrequent
No substitute products from competitors
Do not readily notice the higher price
Slow to change buying habits
Think higher prices are justified
Price a small part of total cost of
obtaining, operating and servicing the
product
Product is more distinctive
Buyers are less aware of substitutes
Buyers cannot compare options easily
Expenditure a small part of buyers income
Expenditure a small part of total purchase
Part of the cost borne by another party
Used in conjunction with another product
previously bought

Surveys
Competitors
Customers
Price Experiments
In-store
Online
Statistical Analysis
Longitudinal (Over Time)
Cross Sectional (Different Locations)

Reduction in price causes marginal
increase in demand- Inelastic Demand
Reduction in price causes substantial
increase in demand- Elastic Demand
Two Way Elasticity
Rs. 15
Rs. 10
100 # 105 #
Rs. 15
Rs. 10
100 #
150 #
Quantity Demanded Per Period
Elastic Demand Inelastic Demand
Fixed vs. Variable Costs
Learning Curve
Plant Capacity vs Cost Curves
Activity Based Costs
Target Costs
Rs. 100
100,000 200,000
Accumulated Production
Rs. 80
Rs. 60
300,000 400,000
Price
Value
Features
Price Change
New Offering
New Features
Enhanced Advertising
Distribution Channel Modification
Markup Pricing
Target Return Pricing
Perceived Value Pricing
Value Pricing
Going Rate Pricing
Auction Type Pricing
English Auction- One Seller, Many buyer
Ascending Bids by Buyers
Dutch Auction 1- One Seller, Many
Buyers, Descending Bids by Seller
Dutch Auction 2- One Buyer- Many
Sellers- Descending Bid by Sellers
Products at several price points with
differing Value Proposition
Prevents competitor from entering
Matches Competitor Offering at different
value points
Impact of Other Marketing Activities
Company Pricing Policies
Gain and Risk Share Pricing
Impact of Pricing on Other Parties
EDLP: Perception of low price
High Low Pricing: Perception of
occasional high value
Purchase Volume
Purchase Location
Distribution Channel
State of Demand
Inventory Levels
Seasonality/ Time of Day
Consumer Promotions
Trade Promotions
Volume
Long Term Contract
Favourable Payment Terms
Additional Services by Intermediary or
Customer
Loss Leader Pricing
Cash Rebates
Low Interest Financing
Longer Repayment Terms
Warranties and Service Cost
Psychological Discounting
Customer Segment Pricing
Product Form Pricing
Image Pricing
Channel Pricing
Location Pricing
Time Pricing
Perception of lower quality
Encouraging Mercenary Attitudes
Trigger Price Wars
Competitor Reaction
Price Escalation Clause
Withdrawal of standard discounts
Unbundling services
Shrinking quantity
Lower cost ingredients
Removing product features
Economy brands at marginally lower
prices