Lecture Notes on Pricing Strategy

Introduction

• Detailed explanation about pricing strategy and its importance
• Tools used to decide the price
• Key parameters for calculating the price
• Importance of understanding the price term

What is Price?

• Definition: The amount of money exchanged by a buyer to a seller for goods/services
• Understanding various pricing strategies for a product/service:
  • Identify company's pricing position, segment, capability, and competitive reaction strategy

Mixed Marketing Strategy

• Categories:
  • Product
    • Address issues related to product quality or other problems
  • Price (to be discussed in detail)
  • Place
    • Importance of location for business growth
  • Promotion
    • Key to selling products & attracting audience
• Engage with the audience (like, comment on the video)

Pricing Strategy Explained with Examples

Example 1: Jack's Bakery Shop

• Known facts about Jack:
  • Good at baking cakes and cookies
  • Familiar with customer preferences
  • Lacks knowledge in pricing strategy
• Importance of pricing knowledge:
  • Incorrect pricing can lead to losses or overpriced products driving customers away
• Multiple research and calculations lead to final price

Example 2: John’s Coffee & Snack Stall

• Known facts about John:
  • Lack of knowledge in pricing techniques
  • Needs to calculate costs and add profit margins
• Step-by-step cost calculation:
  • Coffee: Total cost (sugar, milk, coffee beans) = $5
  • Price set at $10 (adding profit & service charge)
  • Sandwich: Total raw material cost = $10
  • Price set at $15 (including physical investment)
• Importance of competitive pricing:
  • Pricing should align with market trends to avoid driving customers to competitors

Complexity of Pricing

• Multifaceted calculations required
• No specific, universal data for easy computation

Company Pricing Examples

Oreo Biscuits

• Multiple steps in production increasing cost:
  • Harvesting, transportation, quality check, production, etc.
  • All factors considered to determine final product price
• Importance of understanding product demand and market conditions
  • Adjust pricing strategies based on product availability and demand

Festive Season Discounts

• Online/offline stores list items at prices like $99 or $999 instead of $100 or $1000
• Technique to attract customers by seemingly lower prices
• Known as marketing/pricing technique

Marketing Strategies & Pricing Techniques

• Promotions like buy one get one free
  • Often involves hidden price increases
  • Illusion of a deal to attract customers
• Pricing strategy is a subset of marketing strategy:
  • Understand customer needs to create demand and set prices
• Role of dedicated personnel:
  • Multinational companies hire experts to strategize pricing and marketing
  • Experts calculate production, labor costs, and other expenses to set prices

Conclusion

• Stay tuned for more topics
• Audience engagement (like, share, subscribe)
• Invite suggestions and feedback