Pricing and Marketing Intermediaries

Unit - 4
 Pricing Strategy
• A pricing strategy is an approach taken by
businesses to decide how much to charge for
their goods and services.

• The interaction between margin, price, and

selling level is given specific consideration while
pricing products.

• Therefore, it’s important and complicated to

design a proper pricing plan that ensures
business success.
• The price is a component that affects
a company’s revenue significantly.
• It forms the key variable in the
company’s financial modeling and
affects its income, profits, and
investments in the long term.
• Price reflects the idea of a business
and shows its behavior towards
competitors and the value it gives
customers.
Pricing Strategies
• Pricing strategy involves changing and adjusting the price
of goods and services in response to market factors.
Research, Market conditions, consumers’ willingness to
pay, competition, trade margins, expenditures incurred,
etc., are all considered while developing a pricing
strategy.
• Setting a price varies from pricing strategy. It employs
factors that are not taken into consideration while
setting a price. There are a variety of pricing strategies
available. Price skimming, Pricing for market
penetration, premium pricing, economy pricing, bundle
pricing, value-based Pricing, and dynamic Pricing are a
few of them.
• Price determination involves assessing the business and
competitors’ goals and consumer preferences.
• Here are some companies known for selling their
products at a very high price, although other
companies offer similar features at a lower price
point:
• Apple
• Bose
• Cartier
• Chanel
• Dyson
• Gucci
• Hermes
• Louis Vuitton
• Mercedes-Benz
• Tesla
• Rolex
• Acquisition is huge in the SaaS world — industry giants like
Facebook and Microsoft regularly snap up smaller companies in
order to expand their businesses and further penetrate markets.

• Diet Coke was a huge hit, but it attracted primarily female

consumers. Coca-Cola’s solution? Coke Zero, which is essentially
the same in terms of taste and benefits, but squarely positioned
and marketed to capture the male market they were missing.

• Samsung is well known for its penetration pricing strategy. By

offering its phones at a lower entry price with more pricing tiers,
it aggressively lured consumers away from Apple to dominate
the global smart phone market.
 What businesses use premium pricing?

• Premium pricing is used by companies such as

Bentley, Apple, and Tesla. It can also be used by
businesses trying to differentiate themselves from
competitors in the market.
• Premium pricing is an effective marketing strategy
that helps companies differentiate themselves from
their competitors and increase revenue. This can be
done by charging higher prices for certain goods or
services.
• Premium pricing can also help companies attract
customers who have more disposable income and are
willing to pay more for a product or service.
• If you’ve visited a supermarket or booked airline
tickets, you’ve experienced economy pricing.
• Companies use economy pricing strategies to
generate high sales volumes with a low cost
base, but it’s not right for every business.
• It’s a short-term strategy designed to undercut
competitors and take market share.
• Like when entering a new market. Unlike
penetration pricing, economy pricing is a long-
term strategy that attracts higher sales volumes
with permanently low prices. Big box retailers
like Wal-Mart are pros at economy pricing.
 STEPS IN SETTING THE PRICE
• Every organization faces a problem of setting
the prices of products.
• The main aim of marketing strategy of an
organization is to attain marketing objectives
and satisfy the targeted market.
• The marketing decisions affect the prices of
products to a great extent.
There are six steps to deciding which price is
right :
Developing pricing objectives
Assessing the target market’s evaluation of
price
Evaluating competitors’ prices
Choosing a basis for pricing
Selecting a pricing strategy
Determining a specific price
• Developing Pricing Objectives
• Assessing the Target Market’s Evaluation of Price
• Evaluating Competitors’ Prices
• Choosing a Basis for Pricing

 Cost-Based Pricing
 Cost-Plus/Markup Pricing
 Demand-Based Pricing

• Selecting a Pricing Strategy

• Determining the Specific Price
 INITIATING PRICE CUTS AND PRICE INCREASES
• When considering price changes, a company should
consider: Product life cycle, Product importance, Competitor
intentions and resources, and Consumer reactions.
• A company may consider initiating price cuts or increases in
certain circumstances,.
• such as: price competition, low demand, excess capacity,
lower costs, and economies of scale.
• A company may also consider price cuts to gain a competitive
advantage.
• For example, a company with excess capacity may try to sell
more products to increase capacity utilization.
• When considering price changes, a company should also
consider how customers and competitors may
react. Customers may not always understand price changes.
Reasons and Impact on Competitors’ Pricing
and buyers
• Companies use pricing strategies to attract
customers and stay ahead of competitors.
• The impact of pricing on market competition can be
positive or negative depending on the approach
taken by companies.
• Reasons why companies use competitive
pricing: Attract new customers, Boost sales, Keep
existing customers loyal, Discourage competitors
from entering the market, and Protect market share.
• Pepsi and Coca Cola: Both brands compete against
each other over pricing, quality, and features
• Price changes can occur due to various factors.
One common reason for price changes is the
impact of demand and supply shocks on firms'
pricing behavior.

• These shocks can lead to both price increases

and decreases, with supply-side factors having
a higher frequency of price change compared
to demand-side factors .
 RETAILING - MEANING AND TYPES OF
RETAILERS
• Retailing is the sale of goods and services directly to
consumers for their use. It can include physical stores,
online stores, and mobile stores.
• Retailers are the final stop in the supply chain between
producers and consumers. They perform several functions,
including: Promoting products to consumers and Facilitating
consumer access to products.
• Retailers can be classified into different types based on the
service and range of products they offer. Some types of
retailers include:
• Department stores, Supermarkets, Warehouse retailers,
Specialty retailers, Online retailers, and Convenience
stores.
 RETAILING TYPES

• Retailing can be divided into two types:

– Store retailing: Includes different types
of retail stores like department stores,
supermarkets, convenience stores, and
more
– Non-store retailing: Includes direct
selling and automated vending
Retailing Types
• Store retailing: This includes different types of retail stores like department stores,
speciality stores, supermarkets, convenience stores, catalogue showrooms, drug
stores, superstores, discount stores, extreme value stores etc.
• Non-store retailing: Non-store retailing is a type of retailing where the transaction
happens outside conventional shops or stores.
• It is further divided into two types
 direct selling (where the company uses direct methods like door-to-door selling)
and
 automated vending (installing automated vending machines which sell offer a
variety of products without the need of a human retailer).
• Corporate retailing: It involves retailing through corporate channels like chain
stores, franchises, and merchandising conglomerates.
• Corporate retailing focuses on retailing goods of only the parent or partner brand.
• Internet retailing: Internet retailing or online retailing works on a similar concept of
selling small quantities of goods to the final consumer, but they serve a larger
market and don’t have a physical retail outlet where the customer can go and touch
or try the product.
• Service retailing: Retailers not always sell tangible goods; retail offerings also consist
of services. When a retailer deals with services, the process is called service
retailing. Restaurants, hotels, bars, etc. are examples of service retailing.
 WHOLESALING - MEANING

• Wholesaling is the act of buying a large

number of goods directly from a manufacturer
and then selling them to retailers.
• Wholesalers buy in bulk at a discounted price
and sell to a retailer for a higher price, which is
how wholesalers make their profit.
 FUNCTIONS OF WHOLESALERS
Various functions performed by a wholesaler
are:
(i) Buying and Assembling
(ii) Warehousing
(iii) Grading and Packaging
(iv) Transportation
(v) Financing
(vi) Risk Bearing
(vii) Providing Marketing Information
(viii) Dispersion of Goods