How should a company set prices initially for products and services?

Understanding Pricing

• It is not just a number on tag

• Can be rent, tolls, fare, fees, wages, etc.

How companies price?

Complications?

?

Who prices the products/services?

• Small companies – Boss• Larger companies – Product line

managers• When pricing is key – Pricing

department

Where is pricing important?

• Oil companies• Rail roads• Aerospace

traditional strategies?

Have three to five price tiers BMTC is an example

6 steps in setting a pricing policy

selecting the Pricing Objective

determining Demand

• Inelastic demand• Elastic demand

Estimating Costs

analyzing competitor’s costs, prices, and offers

analyze and select a pricing model

• Markup pricing• Target return pricing• Perceived value pricing

selecting the Final Price

Recap of 6 steps

• Selecting the pricing objective• Determining demand• Estimating costs• Analyzing competitor’s costs and

prices• Selecting a pricing method• Selection of final price

References and Credits

• Marketing management – Philip Kotler• https

://www.flickr.com/photos/scarlet_fairy/2601254388/

• http://apcoconstruction.com/wp-content/uploads/2014/10/Estimating.jpg

• https://www.flickr.com/photos/pascalin/2748650718/in/photolist-5bTy6C

Disclaimer

Created by Mohith Reddy, IIT Madras

during an internship by Prof. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com