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8/2/2019 Pricing for Industrial Goods
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PRICE
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Marketing of Industrial Goods2
Characteristics of Price
The factors like delivery, installation costs,
discounts, training costs, trade-in-allowances etc. influences the true price ofthe industrial goods
Pricing is also affected by product, promotionand distribution strategies.
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Marketing of Industrial Goods3
Characteristics of Price (cont..)
Price of a particular product is decided by taking intoaccount other products that are substitutes orcomplements sold by the company
Price is more flexible decision area (changingquantity of goods provided by the seller, changingpremiums and discounts that are offered, changingthe time and place of payment. )
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Marketing of Industrial Goods4
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 ofcost increase or product improvement
Industrial prices are also affected by inflation,interest rate changes, and exchange rates.
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Marketing of Industrial Goods5
Factors affecting industrial Pricing
Internal factors.
Pricing objectives Cost conditions
Pricing policies
External factors.
Competition
Demand conditions
Government regulations
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Marketing of Industrial Goods6
Pricing objectives
Market Skimming
Market Penetration
Product Differentiation
Achieve Targeted ROI
Support Corporate Image
Discourage Competitor Entry Maintain and Improve Market Share
Meeting Competition
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Marketing of Industrial Goods7
Market Skimming
Newly introduced product maximize the profit Heavy competition arises
Skimming is effective if the products arepatent protected or technologically complex
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Marketing of Industrial Goods8
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
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Marketing of Industrial Goods9
Product differentiation
Unique Features of Product
Image, design, technology or customerservice
Company charge a premium for the product
Better Returns to the organization
Acts as a entry barrier due to the strongbrand loyalty
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Marketing of Industrial Goods10
Demand Conditions
Demand is a derived demand
Industrial buyers consider factors likequality, service and delivery
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Marketing of Industrial Goods11
Cost efficiency of firm
Cost efficiency of firm how favorable is the
fixed cost and variable cost as compared tothe competitors
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Marketing of Industrial Goods12
Competition
Monopoly Patent products
Oligopoly
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Marketing of Industrial Goods13
Factors related to competition
Firm size
1. Large sized firms- decide on fixing price
2. Medium sized firms fix price with reference tolarge sized firms
3. Small sized firms concentrate on segmentsoverlooked or ignored by the large players
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Marketing of Industrial Goods14
Factors related to competition (cont..)
Product type
Technical and specialized
no price competition
Sole products cost is apportioned
Joint products demand for joint product canaffect the pricing.
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Marketing of Industrial Goods15
Factors related to competition (cont..)
Product life cycle
Market development Rapid growth
Saturation
Maturity
Decline
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Marketing of Industrial Goods16
Factors related to competition (cont..)
Price leadership
Firm that sets the price for a particularproduct is called as a price leader.
eg Steel, Oil, Cement industries.
Product Differentiation
If the product of the company is strong andunique it will be able to manipulate the price
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Marketing of Industrial Goods17
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 andvariable costs compared to the competitors.
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Marketing of Industrial Goods18
Market Characteristics
Demand Trends
Importance of product to business buyers
Trade characteristics
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Marketing of Industrial Goods19
Exchange Rate
Firms which have international business
Price of imported products is affected Domestic price is also affected
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Marketing of Industrial Goods20
Experience/ Learning Curve
Variable or volume-dependent cost decline
by predictable and constant percentage eachtime cumulative volume is doubled.
Volume depended phenomena
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Marketing of Industrial Goods21
Experience/ Learning Curve (cont..)
Cost savings can be regulated by
Managerial decision making Product and process design
Distribution system
Marketing programs
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Marketing of Industrial Goods22
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
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Marketing of Industrial Goods23
Government factors
Export pricing is influenced by Government
Policies & Regulations Regulation of Margins
Price Floors and Ceiling
Subsidies
Tax Concessions and Exemptions (Dutydraw back scheme)
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Marketing of Industrial Goods24
Government factors (Government
Policies & Regulations) cont
Incentives
Government Competition Taxes (customs duties, sales tax, excise
duties)
International Agreement
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Marketing of Industrial Goods25
Pricing Objectives
Market Penetration
Low price
Market Share
Price is manipulated to increase the market share
Market Skimming New products introduced with higher price
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Marketing of Industrial Goods26
Pricing Objectives (cont)
Fighting Competition
Reduction in price to fight against competitor Preventing New Entry
Price is reduced to restrict new entrants
Shorten pay back period
Retrieval of investment when market is uncertainand risky
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Marketing of Industrial Goods27
Pricing Objectives (cont)
Early Cash Recovery
Firm facing liquidity problem will adopt means torecover cash
Meeting Export Obligation
Price lower than cost
Disposal of surplus Form of dumping
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Marketing of Industrial Goods28
Pricing Objectives (cont)
Optimum Capacity Utilization
Achieving required quantity of export is objectiveof export pricing
Return on Investment
Profit Maximization
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Marketing of Industrial Goods29
Pricing Decision
Company and Country image
Exchange Rates
Experience Curve
Government Factors
Market Characteristics
Strategic Objectives Costs
Competition
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Marketing of Industrial Goods30
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 cancharge
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Marketing of Industrial Goods31
Types of costs in Industrial Marketing
Production cost
Selling and Delivery cost
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Marketing of Industrial Goods32
Production cost
Fixed costs
Variable costs
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Marketing of Industrial Goods33
Selling and Delivery cost
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Marketing of Industrial Goods34
PRICING METHODS/ APPROACHES
Cost based pricing
Market Oriented Pricing
Following Competitors
Negotiated pricing
Customer determined pricing
Break-even price Marginal Cost pricing
Creative pricing