Exam Prep: TU MBS Marketing
Unit 7: Pricing Strategies

Unit 7: Pricing Strategies

* Price is the only element in the marketing mix that produces revenue; all others represent costs!

1. Core Definitions (Entry Points)

Price & Pricing Price: Exchange value (money/utility) [Stanton/Kotler].
Pricing: The administrative act of setting this value.
Target Costing Set desired price/margin FIRST, then establish cost range.
Price Skimming High initial price for unique product to max profit early.
Price Penetration Low initial price to enter mass markets & gain share fast.
Psychological Pricing Odd Pricing (e.g. Rs 99) vs Prestige Pricing (Rs 10,000).
Geographical Pricing Adjusting based on location (FOB Origin, Uniform, Zone).

2. High-Yield Strategic Points

Pricing Objectives (4 Cats)

  • 1. Profit-oriented: Maximize profits / target returns.
  • 2. Sales-oriented: Sales growth & market share.
  • 3. Status Quo: Price stability, survival, meet comp.
  • 4. Quality-oriented: Quality leadership/imitation.

Factors Affecting Pricing

  • Internal: Costs, objectives, PLC stage, firm image.
  • External: Competitors, consumer demand, economy, govt controls.

PLC Pricing Strategies

  • Intro: Skimming (profit) or Penetration (share).
  • Growth: Reduce if needed to counter new entrants.
  • Maturity: Price reductions + non-price competition.
  • Decline: Lower prices to retain loyal segments.

Price Change Responses

Increase for inflation/taxes. Decrease for excess capacity/share. Or use Non-Price Competition (differentiation).

3. Visual Blueprints (Must Draw!)

Model 1: 6-Step Pricing Policy Process
1. Select Objective 2. Determine Demand 3. Estimate Costs 4. Analyze Competitors 5. Select Method 6. Final Price
Model 2: Cost-Oriented Formulas
Cost-Plus = Total Cost + Profit Margin Target Ret. = Unit Cost + [(Ret × Cap) / Unit Sales] BEP (Units) = Total Fixed Cost / (SP - VC/unit) BEP (Rs) = Total Fixed Cost / [1 - (VC / SP)]
Model 3: Skimming vs Penetration
Price ($) Time (PLC Stages) Intro Growth Maturity Skimming Penetration

4. Exam Triggers & Keywords

High-Probability Questions:

  • 5-Mark: Define Price/Pricing (use Stanton/Kotler). OR Skimming vs Penetration. OR Internal/External factors.
  • 15-Mark: Explain the 6-step pricing policy process. OR Discuss pricing strategies across PLC stages.

Nepal Market Reality

Digital: E-com (Daraz) uses automated dynamic pricing.
Regulatory: Govt sets price ceilings on petroleum, electricity, & medicines.
Corporate: MNCs (Coca-Cola) use uniform pricing nationwide. Dept stores use "99-market" psychological pricing.

5. Final Review Canvas

1. Topic Overview

Price is the exchange value; Pricing is setting it. Objectives range from profit/sales growth to status quo maintenance and quality leadership.

2. Strategic Framework

Follows a 6-step process: objective, demand, cost, competitor, method, & final price. Pricing must adapt to PLC (e.g. Skimming in Intro).

3. Nepal Practical Context

Nepal features ad-hoc cost-based pricing and MNC uniform pricing. Government strictly regulates essential goods via price ceilings.