Exam Prep: TU MKT 511
Topic: Pricing Strategies

MKT 511: Pricing Strategies

* Focus: Synthesizing core concepts, methodologies, and market-specific practices in Nepal.

1. Core Definitions (1-Sentence Triggers)

Pricing Functional act of determining monetary exchange value b/w buyer and seller.
Price Skimming High initial price for unique product to max profit before competition enters.
Penetration Strategy Low initial price for new product to rapidly enter mass mkt & capture share.
Psychological Pricing Specific price points (e.g. £9.99) to influence perception of value/prestige.
Target Costing Set desired price & margin FIRST, then manage production costs to meet it.
Geographical Pricing Adjusting list prices based on buyer's location (shipping/transport).

2. High-Yield Strategic Points

Objectives & Factors

  • Objectives: Profit max, sales growth, status quo (survival), quality leadership.
  • Internal Factors: Prod costs, firm objectives, PLC stage, promo activities.
  • External Factors: Mkt competition, consumer demand, govt controls, economy.

Pricing Methods

  • Cost-Oriented: Cost-plus, Target return, BEP.
  • Comp-Oriented: Going-rate, sealed-bid.
  • Demand-Oriented: Perceived-value, customer value.

PLC Pricing Strategies

  • Intro: High skimming (unique) or low penetration (mass).
  • Growth/Mat: Reductions to counter entrants/maintain share.
  • Decline: Reduce to retain loyal base.

Nepalese Context

E-com: Daraz uses automated dynamic pricing.
Regulated: Govt sets ceilings on essentials (petrol, meds).
Tactics: "99" pricing & seasonal/festival promos in dept stores.

3. Visual Blueprints (Must Draw!)

Model 1: The Demand Curve
Price (P) Quantity Demanded (Q) D P1 Q1 P2 Q2

* Inverse Relationship: As Price increases, Demand decreases.

Model 2: 6-Step Price Setting
1. Objective 2. Demand 3. Costs 4. Competitors 5. Method 6. Final Price

4. Exam Triggers & Keywords

High-Probability Questions:

  • 15-Mark Trigger: "Six-Step Process"
    Explain the systematic steps a firm must take when setting a price for the first time.
  • 5-Mark Triggers:
    - Skimming vs Penetration.
    - Pricing practices/Govt involvement in Nepal.
    - Psychological Pricing (Charm vs Prestige).

Nepalese Market Keywords

  • Dynamic Pricing: Daraz algorithms.
  • Price Ceilings: Govt controls on petroleum, meds, fertilizers, seeds.
  • Time-Based Discrimination: NTC utility charges.
  • Uniform Pricing: MNCs like Coca-Cola.

5. Final Review Canvas

1. Topic Overview

Pricing determines the monetary value to acquire a product. It's a critical tool for achieving profit, sales growth, and strategic market positioning.

2. Three Pillars Framework

1. Cost-Based: Internal efficiency (Markup, Target Ret).
2. Comp-Based: Mkt position (Going rate).
3. Demand-Based: Consumer psych (Perceived value).

3. Nepal Hybrid Reality

A hybrid environment: E-commerce uses sophisticated dynamic pricing & psych tactics, while Govt maintains strict price ceilings on essentials for social welfare.