Page 202 - DMGT408DMGT203_Marketing Management

Unit 8: Pricing: Understanding and Capturing Customer Value

However the second category of methods is competition based or market based methods, Notes
in which the prices are decided on the prevailing market condition and customary pricing
methods.

8.7 Keywords

Going Rate Pricing: In this method, the firm bases its price on what the average price of the
product is in the industry or prices charged by competitors

Odd-even Pricing: In this method, the buyer charges an odd price to get noticed by the consumer.
A typical example of odd pricing is the pricing strategy followed by Bata.
Perceived Value Pricing Method: In this method, prices are decided on the basis of customer’s
perceived value. They see the buyer’s perceptions of value, not the seller’s cost as the key
indicator of pricing. They use various promotional methods like advertising and brand building
for creating this perception.
Price: Price is the exchange value of goods and services in terms of money.
Psychological Pricing: In this method, the marketer bases prices on the psychology of consumers.
Many consumers perceive price as an indicator of quality. While evaluating products, buyers
carry a reference price in their mind and evaluate the alternatives on the basis of this reference
price. Sellers often manipulate these reference points and decide their pricing strategy.
Sealed Bid Pricing: In this method, the firms submit bids in sealed covers for the price of the job
or the service. This is based on firm’s expectation about the level at which the competitor is
likely to set up prices rather than on the cost structure of the firm.
Target Return Pricing: In this method, the firm decides the target return that it expects out of
business and then decides prices.

8.8 Review Questions

1. How is price of a product related to the customer value?
2. State important factors should a marketer consider before setting a product’s price?
3. Using examples, discuss the advantages and disadvantages of cost-plus pricing.
4. Discuss psychological pricing strategy. Illustrate with examples the application of
psychological pricing strategy.
5. Compare cost-based and demand-based pricing methods with examples and critically
analyse it.

6. Explain the term promotional pricing. What are its advantages and disadvantages? State
relevant examples.
7. Explain the technique of promotional pricing followed by Koutons Retail.
8. Pricing has a crucial role to play in influencing consumer psychology. Explain the role of
pricing in creating consumer perception about quality with suitable examples.
9. “For a variety of marketing situations price is expressed in different terms.” Justify.
10. Contrast price competition and non-price competition.

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