Differentiated Pricing

ADAPTING
PRICES
Avilipsa Roy : 19020841173
Ayushi Vijayvargiya : 19020841175
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Prateek Laddha : 19020841190
Nawaz Sharif: 19020841184
Shivangi Gautam : 19020841198
Tushar Srivastava : 19020841210
PRICE ADAPTION STRATEGIES
Price Discounts
Promotional
&
Allowances
Pricing
Geographical Differentiated
Pricing Pricing
GEOGRAPHICAL
PRICING
The practice of modifying prices
to reflect the geographical
location of the buyer and the
associated shipping cost
COMMON GEOGRAPHICAL PRICING STRATEGIES
Uniform Delivery Pricing
Free Onboard Origin
Freight-Absorption Pricing
Zone Pricing
HOW TO GET PAID??
Hard Currency Countertrade

BARTER SYSTEM
 A way of transaction popular
since the 6000 BC
 The buyer and seller directly

exchange goods, with no
money and no third party
involved
 In today’s time businesses run

exchange offers
COMPENSATION DEAL
Payment Total
Payment
in
in Cash Payment
Products
Example:
General Motors Corporation sold $ 12 million worth of
locomotive and diesel engines to Yugoslavia and took cash and
$4 million in Yugoslavian cutting tools as payment
BUYBACK ARRANGEMENT
 The buyback arrangement usually operates in relation to supply of capital

plant and/or equipment.
 Under this arrangement the exporter of capital plant or equipment buys back a
determined quantity of the output and the export price for it.( from the buyer
country ) is offset against the debt.
 For e.g. the seller sells a plant,
equipment, to a company in
another country and agrees to
accept as partial payment
products manufactured with the
supplied equipment.
 This is popular system of
countertrade particularly in
China and Russia.
 Buy back arrangement serve as
a legal function to serve as a
means for the legal sale of
collateral but act more like a
secured loan or deposit.
RISKS INVOLVED IN BUYBACK ARRANGEMENT
Changes in the value of buyback products or exchange

1 rates affecting the price of buyback products
Market changes, both domestic and foreign in respect

2 of demand and supply
OFFSET
Offset is a reciprocal arrangement whereby the government in the
importing country seeks to recover large sums of hard currency spent on
expensive purchases such as military aircraft or telecommunication
systems.
For E.g.: PepsiCo sold its cola syrup to the government of the Soviet
Union for rubles and agreed to buy Russian vodka at a certain rate for sale
in the United States.
Offset may also involve cooperation in manufacturing, some form of

technology transfer, placing subcontracts locally or arranging local
assembly or manufacturing equal to a certain percentage of the contract
value.
TYPES OF OFFSETS
INDIRECT
DIRECT
The offset is said to be indirect when
The offset is said to be direct when the buyer requires the seller to enter
some components of the item sold are into a long term industrial or other
to be manufactured within the buyer’s co-operation and investment, but this
country and that the seller agrees to co-operation or investment is not
buy those components to use them in- related to goods supplied by the
house seller.
PRICE DISCOUNTS AND
ALLOWANCES
PRICE DISCOUNTS AND ALLOWANCES
Early
Purchase
Most companies
adjust their list
price and give
Volume
discounts and Purchase
allowances
Off Season
Purchase
Discount Pricing
Pricing strategy Some product

where you mark Discounting categories self
down becomes the destruct by
the prices of your norm. always being on
merchandise sale
Quick discounts often given by the salesperson
to close a sale .
Customers think that the company's list price

is SOFT
The discount undermine the value perception of

the offerings.
BENEFITS?
Signing a longer
contract
Concessions Ordering
in return Electronically
Buying larger
quantities
DISCOUNT TYPES
ALLOWANCE
SEASONAL PRICE
DISCOUNT DISCOUNT
QUANTITY
DISCOUNT
FUNCTIONAL
DISCOUNT
PRICE DISCOUNT
A Price reduction to
buyers who pay bills
promptly
Ex. 2/10, net 30
Payment is due within 30

days & buyer can deduct
2% by paying within 10
days
QUANTITY DISCOUNTS
Who buys large volume
Ex. $10/unit for <100, $9/unit for >100 units
Must be offered equally to all customers
Can be offered on each order placed

FUNCTIONAL DISCOUNT
Payment to
distribution
channel for
Offered by a performing
manufacturer to some service
trade channel
members if they
Manufacturer must perform certain
offer the same functions, i.e.
functional discounts selling, storing
within each channel
SEASONAL
DISCOUNT
A price reduction to those who
buy merchandise or services out
of season.
Hotels, airlines offer seasonal
discounts in slow selling prices.
Done in order to lure the
customers to buy their offering.
Disadvantages - firm may
have to offer these discounts on
every season which comes
during the year.
An extra payment designed to gain
reseller participation in special
programs
Trade-in allowances are granted

for turning in an old item when
buying a new one.
ALLOWANCES
Promotional allowances reward

dealers for participating in
advertising and sales support
programs.
PROMOTIONAL
PRICING
LOSS LEADER
A loss leader (also leader) is a pricing strategy where a product is sold at a price
below its market cost to stimulate other sales of more profitable goods or services.
SPECIAL EVENT PRICING:
Special event pricing entails linking a price discount to a holiday, season or
specially advertised sale day. The benefit of special event pricing is sales
volume.
SPECIAL CUSTOMER PRICING:
Sellers will offer special prices exclusively to certain customers.
LOW INTEREST FINANCING
Instead of cutting its price, the company can offer low interest financing.
LONGER PAYMENT TERMS
Longer payment terms are a policy in which one company/individual does
business with another but uses leverage it has to pay invoices over a longer-
than-normal period, which can exceed 90 days — and sometimes 120 days or
more.
CASH REBATES :
Cash rebate is an offer given to consumers for a cash discount, when they
purchase a consumer good.
WARRANTIES AND SERVICE CONTRACTS:
• Manufacturers generally use warranties and guarantees as marketing tools to
give customers assurance that what they are buying is of good quality.
• It can also be used to enhance a brand's reputation or serve as a competitive
differentiator for the consumer.
PSYCHOLOGICAL DISCOUNTING:
This strategy involves setting an artificially high price and then offering
the product at substantial savings.
DIFFERENTIATED
PRICING
PRICE DISCRIMINATION?
• Price discrimination is a selling strategy that charges customers different

prices for the same product or service based on what the seller thinks
they can get the customer to agree to. In pure price discrimination, the
seller charges each customer the maximum price he or she will pay. In
more common forms of price discrimination, the seller places customers
in groups based on certain attributes and charges each group a different
price.
TYPES OF PRICE
DISCRIMINATION
DEGREE 1
• First-degree discrimination, or perfect price discrimination, occurs when

a business charges the maximum possible price for each unit consumed.
Because prices vary among units, the firm captures all
available consumer surplus for itself, or the economic surplus. Many
industries involving client services practice first-degree price
discrimination, where a company charges a different price for every good
or service sold.
EXAMPLES
• Auction
• Uber Surge pricing
DEGREE 2
• Second-degree price discrimination occurs when a company charges a
different price for different quantities consumed, such as quantity
discounts on bulk purchases.
DEGREE 3
• Third-degree price discrimination occurs when a company charges a

different price to different consumer groups.
CUSTOMER SEGMENT PRICING
• A theater may divide moviegoers into seniors, adults, and children, each paying
a different price when seeing the same movie.
PRODUCT –FORM PRICING
• Different versions of the product are priced differently, but not in
proportion to their costs.
IMAGE PRICING
• Image pricing is a widely practiced marketing strategy where in the

prices are set higher because it’s believed that a premium price would
also increase consumer desire. Customers are often willing to pay higher
prices for branded items because of the image associated with them. They
would not investigate if the price accurately reflects the value.
• Alternative brands of cosmetics, soaps.
• Wines
EXAMPLES
CHANNEL PRICING
LOCATION PRICING
TIME PRICING
YIELD PRICING
• Pricing strategy
• Control of availability
• Inventory control
American Airlines had accredited yield

management policies for a revenue
increase of $500 million per year.
Delta also used similar systems to
increase its revenues by almost $300
million

Differentiated Pricing

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ADAPTING

Uniform Delivery Pricing

Free Onboard Origin

Hard Currency Countertrade

 The buyer and seller directly

 In today’s time businesses run

 The buyback arrangement usually operates in relation to supply of capital

Changes in the value of buyback products or exchange

Market changes, both domestic and foreign in respect

Offset may also involve cooperation in manufacturing, some form of

Pricing strategy Some product

Customers think that the company's list price

The discount undermine the value perception of

Ex. 2/10, net 30

Payment is due within 30

Ex. $10/unit for <100, $9/unit for >100 units

Must be offered equally to all customers

Can be offered on each order placed

Trade-in allowances are granted

Promotional allowances reward

• Price discrimination is a selling strategy that charges customers different

• First-degree discrimination, or perfect price discrimination, occurs when

• Third-degree price discrimination occurs when a company charges a

• Image pricing is a widely practiced marketing strategy where in the

American Airlines had accredited yield

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