Page 195 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes
Example: The communication might say, “Regular price was ` 495, now reduced to
` 299.” This is a deceptive practice and often used by retailers. Occasionally we come across
advertisements that show ` 495 crossed (X) and a fresh price written as ` 250.
Special Event Pricing: This involves coordinating price cuts with advertising for seasonal or
special situations to attract consumers by offering special reduced prices.

Example: Before the beginning of a new session for young children at school, we see ads
of shoes generally viewed as part of uniform.

Self Assessment

Multiple Choice Questions:
11. Some companies keep the prices of their new products very high. They are said to be
following …………………… strategy.

(a) Skimming (b) Penetration
(c) Competitive (d) Promotional pricing
12. …………………… pricing approach requires the price to be set less than the competing
brands.
(a) Skimming (b) Penetration
(c) Competitive (d) Psychological pricing
13. Some firms price their product very oddly like ` 499.99 or ` 999.99. This type of pricing
strategy is referred to as:
(a) Psychological pricing (b) Sealed bid pricing
(c) Different pricing (d) Competitive pricing
14. Deceptive pricing is also referred to as …………………….
(a) Odd-even pricing (b) Loss-leader pricing
(c) Confusing pricing (d) Superficial discounting

8.5 Selection of Pricing Methods

After selection of the pricing strategy or strategies to accomplish the pricing objectives, a company
decides about a pricing method. A pricing method is a systematic procedure for setting the
prices on a regular basis. The pricing method structures the calculation of actual price of a
product based on considerations of demand, costs, and competition.

8.5.1 Cost-based Pricing

Cost-based pricing methods are fairly common. Price is determined by adding either rupee
amount or a percentage to the product’s cost to achieve the desired profit margin. Cost-based
pricing methods do not take into consideration factors such as supply and demand, or competitors’
prices. They are not necessarily related to pricing policies or objectives.

Markup Pricing

In markup pricing a certain predetermined percentage of product’s cost, called markup, is added
to the cost of the product to determine the price.

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