Pricing of Industrial goods

PRICE : 

PRICE

Characteristics of Price : 

Marketing of Industrial Goods 2 Characteristics of Price The factors like delivery, installation costs, discounts, training costs, trade-in- allowances etc. influences the true price of the industrial goods Pricing is also affected by product, promotion and distribution strategies.

Characteristics of Price (cont..) : 

Marketing of Industrial Goods 3 Characteristics of Price (cont..) Price of a particular product is decided by taking into account other products that are substitutes or complements sold by the company Price is more flexible decision area (changing quantity of goods provided by the seller, changing premiums and discounts that are offered, changing the time and place of payment. )

Characteristics of Price (cont..) : 

Marketing of Industrial Goods 4 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 of cost increase or product improvement Industrial prices are also affected by inflation, interest rate changes, and exchange rates.

Factors affecting industrial Pricing : 

Marketing of Industrial Goods 5 Factors affecting industrial Pricing Internal factors. Pricing objectives Cost conditions Pricing policies External factors. Competition Demand conditions Government regulations

Pricing objectives : 

Marketing of Industrial Goods 6 Pricing objectives Market Skimming Market Penetration Product Differentiation Achieve Targeted ROI Support Corporate Image Discourage Competitor Entry Maintain and Improve Market Share Meeting Competition

Market Skimming : 

Marketing of Industrial Goods 7 Market Skimming Newly introduced product maximize the profit Heavy competition arises Skimming is effective if the products are patent protected or technologically complex

Market Penetration : 

Marketing of Industrial Goods 8 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

Product differentiation : 

Marketing of Industrial Goods 9 Product differentiation Unique Features of Product Image, design, technology or customer service Company charge a premium for the product Better Returns to the organization Acts as a entry barrier due to the strong brand loyalty

Demand Conditions : 

Marketing of Industrial Goods 10 Demand Conditions Demand is a derived demand Industrial buyers consider factors like quality, service and delivery

Cost efficiency of firm : 

Marketing of Industrial Goods 11 Cost efficiency of firm Cost efficiency of firm – how favorable is the fixed cost and variable cost as compared to the competitors

Competition : 

Marketing of Industrial Goods 12 Competition Monopoly Patent products Oligopoly

Factors related to competition : 

Marketing of Industrial Goods 13 Factors related to competition Firm size Large sized firms- decide on fixing price Medium sized firms – fix price with reference to large sized firms Small sized firms – concentrate on segments overlooked or ignored by the large players

Factors related to competition (cont..) : 

Marketing of Industrial Goods 14 Factors related to competition (cont..) Product type Technical and specialized – no price competition Sole products – cost is apportioned Joint products – demand for joint product can affect the pricing.

Factors related to competition (cont..) : 

Marketing of Industrial Goods 15 Factors related to competition (cont..) Product life cycle Market development Rapid growth Saturation Maturity Decline

Factors related to competition (cont..) : 

Marketing of Industrial Goods 16 Factors related to competition (cont..) Price leadership Firm that sets the price for a particular product is called as a price leader. eg Steel, Oil, Cement industries. Product Differentiation If the product of the company is strong and unique it will be able to manipulate the price

Costs : 

Marketing of Industrial Goods 17 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 and variable costs compared to the competitors.

Market Characteristics : 

Marketing of Industrial Goods 18 Market Characteristics Demand Trends Importance of product to business buyers Trade characteristics

Exchange Rate : 

Marketing of Industrial Goods 19 Exchange Rate Firms which have international business Price of imported products is affected Domestic price is also affected

Experience/ Learning Curve : 

Marketing of Industrial Goods 20 Experience/ Learning Curve Variable or volume-dependent cost decline by predictable and constant percentage each time cumulative volume is doubled. Volume depended phenomena

Experience/ Learning Curve (cont..) : 

Marketing of Industrial Goods 21 Experience/ Learning Curve (cont..) Cost savings can be regulated by Managerial decision making Product and process design Distribution system Marketing programs

Image of firm : 

Marketing of Industrial Goods 22 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

Government factors : 

Marketing of Industrial Goods 23 Government factors Export pricing is influenced by Government Policies & Regulations Regulation of Margins Price Floors and Ceiling Subsidies Tax Concessions and Exemptions (Duty draw back scheme)

Government factors (Government Policies & Regulations) cont… : 

Marketing of Industrial Goods 24 Government factors (Government Policies & Regulations) cont… Incentives Government Competition Taxes (customs duties, sales tax, excise duties) International Agreement

Pricing Objectives : 

Marketing of Industrial Goods 25 Pricing Objectives Market Penetration Low price Market Share Price is manipulated to increase the market share Market Skimming New products introduced with higher price

Pricing Objectives (cont…) : 

Marketing of Industrial Goods 26 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 uncertain and risky

Pricing Objectives (cont…) : 

Marketing of Industrial Goods 27 Pricing Objectives (cont…) Early Cash Recovery Firm facing liquidity problem will adopt means to recover cash Meeting Export Obligation Price lower than cost Disposal of surplus Form of dumping

Pricing Objectives (cont…) : 

Marketing of Industrial Goods 28 Pricing Objectives (cont…) Optimum Capacity Utilization Achieving required quantity of export is objective of export pricing Return on Investment Profit Maximization

Pricing Decision : 

Marketing of Industrial Goods 29 Pricing Decision Company and Country image Exchange Rates Experience Curve Government Factors Market Characteristics Strategic Objectives Costs Competition

COST IN INDUSTRIAL PRICING : 

Marketing of Industrial Goods 30 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 can charge

Types of costs in Industrial Marketing : 

Marketing of Industrial Goods 31 Types of costs in Industrial Marketing Production cost Selling and Delivery cost

Production cost : 

Marketing of Industrial Goods 32 Production cost Fixed costs Variable costs

Selling and Delivery cost : 

Marketing of Industrial Goods 33 Selling and Delivery cost

PRICING METHODS/ APPROACHES : 

Marketing of Industrial Goods 34 PRICING METHODS/ APPROACHES Cost based pricing Market Oriented Pricing Following Competitors Negotiated pricing Customer determined pricing Break-even price Marginal Cost pricing Creative pricing