JAIIB Super Notes: Principles and Practices of Banking: Module-D: Pricing

JAIIB – Super-Notes © M S Ahluwalia Sirf Business

Pricing

Module D: Support Services

Marketing of Banking Services/Products

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JAIIB – SUPER NOTES

Principles & Practices of Banking: Pricing





Contents

Coverage:

1. Importance of Pricing

2. Objectives of Pricing

3. Factors influencing Pricing

4. Pricing Methods

5. Pricing Strategies

6. Bank Pricing





IMPORTANCE OF PRICING

1.





Pricing

• Price is the sum value of all the values that consumers

exchange for the benefits or having or using the product or

service





OBJECTIVES OF PRICING

2.





Objectives

Profit Survival Market Share

Cash Flow Status Quo Product Quality

Communicating Image





FACTORS INFLUENCING PRICING

3.





Factors Influencing Pricing

Factors

Internal factors

External factors





PRICING METHODS

4.





Pricing Methods C

ostg

-Based P

ricin

g

Mark Up Pricing: Variable costs and contribution for fixed costs

Absorption Cost Pricing: Margin for profit

Target Return Pricing: Return on the investment

Marginal Cost Pricing: Direct variable costs are fully realized. Only a portion of fixed costs may realized

Valu

e-B

ased P

ricin

g

Perceived Value Pricing: Buyer’s perception of value

Value Pricing: Product with high value at a fairly low price

Co

mp

eti

tio

n-B

ase

d

Pri

cin

g

Going Rate Pricing: Based on competitor’s prices

Auction Type Pricing:

•English Auctions - One seller many buyer

•Dutch Auctions

•Sealed Bid Auctions

Group Pricing





PRICING STRATEGIES

5.





Pricing Strategies

Geographical pricing

Price discount and allowances

Psychological pricing

•Loss-leader pricing: Loss is covered by sale of other items

•Special event pricing

•Cash rebates

•Low-interest financing

•Longer payment terms

•Warranties and service contracts

•Psychological discounting

Promotional pricing

• First degree: Different prices to each customer depending upon their intensity of demand

• Second Degree: Lower prices for buyers of a larger volume

• Third degree: Depending upon class of buyer:

• Customer Groups: Student, Senior Citizen

• Product form

• Image pricing

• Channel

• Location

• Time

Discriminatory pricing

Market Skimming Pricing

Market Penetration Pricing





Pricing Strategies

• Product Line Pricing: Developing a product line

• Captive Product Pricing: Main product at lower price, ancillary product at higher price

• Two-Part Pricing: Split into fixed and variable component

• By-Product Pricing: Byproducts obtained in production of other products

• Product-bundling pricing

Product Mix Pricing





BANK PRICING

6.





Bank Pricing

Bank Pricing:

There are two major costs, which have to be considered while pricing bank products:

• Interest cost

• Servicing cost

Interest cost constitutes 67 % of the price and service cost is around 33 % in any bank product.

Other factors:

• Risk and return

• Monetary policy

• Capital adequacy

• Cost-benefit analysis





Thank You!

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to give?

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M S Ahluwalia, amongst other things, is a visual artist, blogger,

blog designer and of course an MBA and Banker from New

Delhi, India.

To know more about him you may visit his blog-site: Estudiante De La Vida

For more Super-Notes visit: Sirf Business



















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