Price Structure

Price
 The amount of money expected, required, or given in payment for something.
 Is simply the value you give in exchange for a product or service
 One of the 4 important aspects of marketing mix

 4 P’s of Marketing
1. Product
2. Price
3. Promotion
4. Place

 Pricing is mainly determined by the cost of the product and also how much the
customer would be willing to pay.
 How a product is priced will directly affect how it sells. This is linked to what the
perceived value of the product is to the customer rather than an objective costing
of the product on offer.
 If there is a positive customer value, than a product may be successfully priced
higher than its objective monetary value. Conversely, if a product has little value
in the eyes of the consumer, then it may need to be underpriced to sell.
Price structure
 An approach in products and services pricing which defines various prices,
discounts, offers consistent with the organization goals and strategy.
 The strategy adopted by exporters with respect to the pricing of goods while
marketing them to the ultimate user.
 Your firm’s market research should include an evaluation of all variables that may
affect the price range for your product or service. If your company’s price is too
high, the product or service will not sell. If the price is too low, export activities
may not be sufficiently profitable or may actually create a net loss.

 Traditional components for determining proper pricing are cost approach,

Cost plus pricing

 When the exporter starts with the domestic manufacturing cost and adds
administration, research and development, overhead, freight forwarding,
distributor margins, customs charges, and profit.
 However, the effect of this pricing approach may be that the export price
escalates into an uncompetitive range once exporting costs have been included.
Marginal cost pricing

 is a more competitive method of pricing a product for market entry. This method
considers the direct out-of-pocket expenses of producing and selling products for
export as a floor beneath which prices cannot be set without incurring a loss.
 For example, additional costs may occur because of product modification for the
export market. Costs may decrease, however, if the export products are stripped-
down versions or made without increasing the fixed costs of domestic production.

Demand Approach
Penetration pricing/ Market Penetration
 Pricing for market penetration is a method used to attract a high volume of
buyers by marketing products or services at a lower price than competitors.
 While this strategy can be extremely useful in increasing market share, it is worth
keeping in mind that many new businesses who elect this strategy experience an
initial income drop that can be difficult to come back from.
 The idea is that once a business successfully penetrates the market, they will be
able to grow and expand their brand to attain higher profitability to make up for
this early setback.
Prestige pricing
 Pricing your product high so that only wealthier customers can afford it. You
attempt to use high price and limited availability to enhance your products image.
Bundling Price
 Two different products are combined together and they are offered as a deal.
Example: Shampoo and Conditioner
 Used to get rid of excess stocks
Promotional Pricing Strategy
 It is just like bundling price. But here, the products are bundled so as to make the
customer use the bundled product for the first time.
 This type of pricing focuses on buying one and getting a new type of product for
free.
 Can also serve as a way to move old stock as well as to increase brand
awareness.
Price Skimming
 This strategy tends to work best during the introductory phase of products and
services. It involves introducing a product to the market at a premium price, then
methodically lowering the price over time to attract a larger customer base.
 This method allows a company to generate considerable profits in the
introductory phase of a product, and works best for products that can be
marketed to consumers willing to pay top price for the latest and greatest.
 Apple executes the price skimming strategy every year, pricing each new iPhone
steeply during the introductory phase, then lowering that price as time goes by.
Psychological Pricing
 Other companies often priced their item at $9.99 instead of the near equivalent of
$10, the reason behind it is psychological.
 It creates the illusion of a less expensive product without significantly affecting
profitability.
Competition Approach
Customary
 Strategy of basing prices on historical price that customers expect.
Loss leader
 Deliberately sell a product below its customary price to attract attention to it.
References:

https://www.slideshare.net/mobile/fadikhisko/pricing-strategy-ppt
https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/11682-
price-structure.html
https://www.repsly.com/blog/consumer-goods/pricing-strategies-what-works-best-for-
your-business
https://www.google.com/amp/s/www.allbusiness.com/the-price-is-right-7-ways-to-
determine-your-products-pricing-structure-102619-1.html/amp
https://www.marketing91.com/types-of-pricing/
https://www.businessmanagementideas.com/marketing/pricing-decisions/factors-
affecting-pricing-decisions/18821