3.adapting the price

How should a company adapt prices to meet varying circumstances and opportunities?

Companies do not set a single price but rather develop a pricing structure

Structure reflects the variations in

• Geographical demand and costs• Market-segment requirements• Purchase timings• Order levels• Delivery frequency • Service contracts, etc.

Pricing for rural markets• No compromise on quality• Lesser quantity• ‘Coinage’ pricing

Geographical Pricing4 important price adapting strategies:

Barter, Compensation deal, Buyback arrangement, Offset, Countertrade, etc.

Price discounts and allowancesDiscount, Quantity discount, Functional discount, Seasonal discount, Allowance

Risks of discounting• Discounting may become the norm• Undermining the value perceptions of

offerings• Self-destruction by always being on

sale• Losing long-run profits

Promotional Pricing

Types• Loss-leader pricing• Special event pricing (Diwali, Christmas

offers)• Psychological discounting• Longer payment terms (Low EMI auto’s)• Special customer pricing (Platinum Debit

Card)• Cash rebates• Warranties and service contracts

Differentiated Pricing The three degrees of price discrimination

Elements• Customer-segment pricing• Product-form pricing• Image pricing• Channel pricing• Location pricing• Time pricingBeware of legal issues!!

Recap-Price adapting strategies

• Geographical pricing (Cash, Countertrade)

• Price discounts and allowances• Promotional pricing• Differentiated pricing

References and Credits• Marketing management – Philip Kotler• https://www.flickr.com/search/?

text=adapting• http://

digital-photography-school.com/wp-content/uploads/2014/02/paper-and-pen.jpg

• https://ncpedwin.files.wordpress.com/2011/03/spry_sachet.jpg

• http://www.slb.com/contact_us/~/media/Images/contact/contact_sales_map2_updated.ashx?w=433&h=240&as=1

Disclaimer

Created by Mohith Reddy, IIT Madras

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

www.IIMInternship.com