PRICE

Characteristics of Price

The factors like delivery, installation costs, discounts, training costs, trade-inallowances etc. influences the true price of the industrial goods Pricing is also affected by product, promotion and distribution strategies.
Marketing of Industrial Goods

Characteristics of Price (cont..)

Price of a particular product is decided by taking into account other products that are substitutes or complements sold by the company Price is more flexible decision area (changing quantity of goods provided by the seller, changing premiums and discounts that are offered, changing the time and place of payment. )
Marketing of Industrial Goods

Characteristics of Price (cont..)

Prices are established by industrial bidding and in many cases by means of negotiations Industrial price increases are justifiable on basis of cost increase or product improvement Industrial prices are also affected by inflation, interest rate changes, and exchange rates.
Marketing of Industrial Goods

Factors affecting industrial Pricing

Internal factors.

Pricing objectives Cost conditions Pricing policies Competition Demand conditions Government regulations
Marketing of Industrial Goods

External factors.

Pricing objectives

Market Skimming Market Penetration Product Differentiation Achieve Targeted ROI Support Corporate Image Discourage Competitor Entry Maintain and Improve Market Share Meeting Competition
Marketing of Industrial Goods

Market Skimming

Newly introduced product maximize the profit Heavy competition arises Skimming is effective if the products are patent protected or technologically complex

Marketing of Industrial Goods

Market Penetration

Market penetration- low price

Suitable when price elasticity of demand is Marketer plans to capture huge amount of market share Used when competition is high Volume are high and unit price gets lowered More complementary products would be sold Large volume have to be sold ROI is lower
Marketing of Industrial Goods

Product differentiation

Unique Features of Product Image, design, technology or customer service Company charge a premium for the product Better Returns to the organization Acts as a entry barrier due to the strong brand loyalty
Marketing of Industrial Goods

Demand Conditions

Demand is a derived demand Industrial buyers consider factors like quality, service and delivery

10

Marketing of Industrial Goods

Cost efficiency of firm

Cost efficiency of firm how favorable is the fixed cost and variable cost as compared to the competitors

11

Marketing of Industrial Goods

Competition

Monopoly Patent products Oligopoly

12

Marketing of Industrial Goods

Factors related to competition

Firm size
1.

2.

3.

Large sized firms- decide on fixing price Medium sized firms fix price with reference to large sized firms Small sized firms concentrate on segments overlooked or ignored by the large players

13

Marketing of Industrial Goods

Factors related to competition (cont..)

Product type

Technical and specialized no price competition Sole products cost is apportioned Joint products demand for joint product can affect the pricing.

14

Marketing of Industrial Goods

Factors related to competition (cont..)

Product life cycle

Market development Rapid growth Saturation Maturity Decline

15

Marketing of Industrial Goods

Factors related to competition (cont..)

Price leadership Firm that sets the price for a particular product is called as a price leader. eg Steel, Oil, Cement industries. Product Differentiation

If the product of the company is strong and unique it will be able to manipulate the price

16

Marketing of Industrial Goods

Costs

Pricing decision is influenced by the costs of production (fixed and variable) Cost flexibility extend on its cost efficiency which is how favorable is the fixed and variable costs compared to the competitors.

17

Marketing of Industrial Goods

Market Characteristics

Demand Trends Importance of product to business buyers Trade characteristics

18

Marketing of Industrial Goods

Exchange Rate

Firms which have international business Price of imported products is affected Domestic price is also affected

19

Marketing of Industrial Goods

Experience/ Learning Curve

Variable or volume-dependent cost decline by predictable and constant percentage each time cumulative volume is doubled. Volume depended phenomena

20

Marketing of Industrial Goods

Experience/ Learning Curve (cont..)

Cost savings can be regulated by

Managerial decision making Product and process design Distribution system Marketing programs

21

Marketing of Industrial Goods

Image of firm

Higher reputed firms can easily increase price Image of the country affects the pricing freedom Poor quality image is a hindrance to better price

22

Marketing of Industrial Goods

Government factors
Export pricing is influenced by Government Policies & Regulations Regulation of Margins Price Floors and Ceiling Subsidies Tax Concessions and Exemptions (Duty draw back scheme)
Marketing of Industrial Goods

23

Government factors (Government Policies & Regulations) cont

Incentives Government Competition Taxes (customs duties, sales tax, excise duties) International Agreement

24

Marketing of Industrial Goods

Pricing Objectives

Market Penetration

Low price Price is manipulated to increase the market share

Market Share

Market Skimming

New products introduced with higher price

25

Marketing of Industrial Goods

Pricing Objectives (cont)

Fighting Competition

Reduction in price to fight against competitor Price is reduced to restrict new entrants Retrieval of investment when market is uncertain and risky

Preventing New Entry

Shorten pay back period

26

Marketing of Industrial Goods

Pricing Objectives (cont)

Early Cash Recovery

Firm facing liquidity problem will adopt means to recover cash Price lower than cost Form of dumping

Meeting Export Obligation

Disposal of surplus

27

Marketing of Industrial Goods

Pricing Objectives (cont)

Optimum Capacity Utilization

Achieving required quantity of export is objective of export pricing

Return on Investment Profit Maximization

28

Marketing of Industrial Goods

Pricing Decision

Company and Country image Exchange Rates Experience Curve Government Factors Market Characteristics Strategic Objectives Costs Competition
Marketing of Industrial Goods

29

COST IN INDUSTRIAL PRICING

Cost and Supply conditions gives minimum price the seller should get Demand and competitive conditions determine the maximum price the seller can charge

30

Marketing of Industrial Goods

Types of costs in Industrial Marketing

Production cost Selling and Delivery cost

31

Marketing of Industrial Goods

Production cost

Fixed costs

Variable costs

32

Marketing of Industrial Goods

Selling and Delivery cost

33

Marketing of Industrial Goods

PRICING METHODS/ APPROACHES

Cost based pricing Market Oriented Pricing Following Competitors Negotiated pricing Customer determined pricing Break-even price Marginal Cost pricing Creative pricing
Marketing of Industrial Goods

34