 आँ आपिक man‰ celebration ānn편 अग मी आपे mess matter आप आ बजी आप दooh आप द bondingक्रं Tout मरग and then discussing about the pricing objective and corresponding strategies. We are left with two other learning objectives of this unit. In this small video we will take up those two learning objectives. And these two learning objectives are, we have to be clear about what is market scheme and what is penetration pricing? Scheme pricing and penetration pricing. These are two concepts we need to be familiar with. Then we shall try to understand the relevance or the importance of price adjustments because pricing is something that which is safe for much and then we shall forget about this. It's not like that. We shall have to continually modify the prices. We shall have to continually adjust our prices. So market skimming pricing, market penetration pricing and then price adjustment strategies. These are the three aspects which we shall try to understand in this small video and these are based on your self-learning material. So there can be two strategies that mostly a firm can make using pricing as a weapon. One is market skimming pricing, the other one is market penetration pricing. We shall have to be thorough with these two definitions or two concepts and the related intricacies. Market skimming pricing first. What is market skimming pricing? As the word skimming indicates, this strategy literally skims the market. The market has to be skimmed. In a person, it's just too high price. Price is a suppose Sony high definition television. When it was first launched, it was set at a very very high price. Rather than the price got reduced. Likewise, most of the colour televisions, mobile phones, the introductory stage. Because the product development cost is very high, new product. Further research and development will be required. More and more sales will come. That will help in reducing the price. But for the new product, R&D is high, risk is high. So the marketers will be interested in skimming the benefits. So they will set a very high price. As I have given the example, say Sony high definition television. They set a very high price. And subsequently, that's for a lower price. Because you all know product goes through stages. Introduction, road, maturity, decline. So market skimming attains or say aims at say high price and high profits at the introduction stage of its product life cycle. It profitably taps the opportunity. It's normally not targeted for all the customers in the market. It's mostly targeted for those customers who like to experiment with a new product. They are also basically innovators, the customers. And this particular segment will have that psychological propensity to try with a new product at a high price. And they would like to have that experience and would like to demonstrate that experience to others. So to that extent, they are innovators. And this strategy is useful in pricing of new products that have a luxury or specialty element. Let's say Sony high definition television or say very high end mobile handset like that. So when the new product is in a luxury compression products designed with a products, these are some of the examples in which we can kick off market skimming. So here they are enjoying the patronage of an affluent or say that kind of price incentive, insensitive segment of consumers. They are not much bothered about price, high price. They are much bothered. They are basically concerned about the functional utility of the product or it's the novelty of the product, nimnus of the product, innovative view of the product. And in this cases, the skimming strategy is successful. So this market skimming strategy is applicable or say makes sense only under certain conditions. The product quality and image must suppose is higher price. All the products will not support higher price. It's not it. Say high end television, definition television or say mobile handset or some design products they will support high price. And there should be, there may not be enough buyers but there should be a sizeable number of buyers who will be able to sustain this high price. Otherwise, it will the economies of scale will not take place or there will be basic economic conditions will not be made. So the cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more. So small segment of consumers you can charge more. Their advantage has to be there. Finally, the competitors should not be able to enter the market easily and undercut the high price because we are the first mover. We are the innovator. So we have said the high price. So that should deter the competitors to make an easy entity in the market and charge a high price from the market. So that advantage we should ensure of. Then let us discuss penetration pricing. So market skimming is basically at the introduction level with some kinds of products where we can afford to set high price but at that high price should come into it with the product quality and product benefits to a specific group of customers who are basically interested in making use of innovation. After that concept let us discuss what is market penetration pricing. Penetration pricing means penetrate more and more into the market. So have more and more share from the market. So in order to penetrate more and more into the market so basically we set a low price so that we can penetrate more and more. So it is opposite of skimming pricing. Skimming pricing is all about high prices so it is about low prices. Skimming pricing with a specific group of customers. Penetration pricing wider range of customers. So this strategy is useful in pricing of new products under certain circumstances. So when a new product is capable of bringing in a large volume of sales we are capable of large volume of sales we can expect to have large volume of sales not those high definition television. Suppose say acceptable range of television producers and then making a product available so in that case we can think about and then it is not only for the employer or those innovative savvy customers it is for say kind of a larger market in that case we can go for penetration pricing. Good quality not of very high quality acceptable quality price is acceptable in that case we can go for penetration pricing. So for this penetration pricing also several conditions must be present. One is market must be highly price sensitive because if you search high market will withdraw if you search low market will develop a low inferior quality perception of the product the product also has to be of acceptable quality and products on distribution cost should be supportive of this pricing strategy otherwise sales volume will not increase and if the sales volume does not increase in that case the pricing will not give the desired results and this low price should be able to keep competition out to the extent possible. So there should be some kind of barrier for that competition with this acceptable quality price and then wider distribution larger production that is the basic aspects basic strategy of having penetration pricing then skimming pricing penetration pricing let us discuss the other learning objective about a price adjustment strategies. As I have told you pricing is not something that this is determined for once only and then we forget about this pricing will be a continuous process and in the market there will be number of players as we have discussed the internal conditions loss of interface will be there competitive process will come in so we may be required to make a lot of adjustment as far as our pricing decisions are concerned if the competitors increase price how should we respond if the competitors lower the price how should we respond suppose we are going for a new advertisement or say addition of a new product new product pieces so what should be corresponding effect as per the pricing is concerned so it requires lots of adjustment so setting the base price for a product is only the start that is the starting point setting the base price but that will have to be continually since so the company must then adjust the price of just price to adjust for customer and then adjust the price and adjust the customer institutional the market environment related factors so some of the advertisement strategies could be segmented pricing segmented pricing that no two segment no two products will be priced similarly so segment wise low price segment high price segment medium price segment premium category like that segment wise we can think about pricing we can think about discounted allowance pricing suppose those who pay early so for prompt payment we may think about giving a discount for late payment we can give you early bar discount these are also pricing related aspects elements for prompt process letter process also installment process these are different aspects psychological pricing we can play with the consumer psychology as we have discussed if the consumers are not that price and sensitive and we are maintaining we are improving our product quality we can think about giving a high quality product at a high price so there could be high premium pricing also the very very high quality product at a very very high price there could be promotional pricing suppose buy one get two free buy two get ten percent discount free there could be promotional pricing there could be geographical pricing suppose for our north eastern region many of the products you might see in the packaging that for this space the price is this much for the north eastern states the price is this much that is the geographical aspects because transportation cost is there and the company will consider all those things and in the MRP only they will state it for north eastern region this is the price for the other states this is the price something like that and in today's context dynamic pricing suppose airline ticketing the price keeps on varying suppose you want to from Guwahati to Kolkata and you purchase a ticket at this point of time say this is 3000 rupees tomorrow you just you can sell that ticket and tomorrow suppose you go for buying another airship so the price could be 3500 or it could be 2800 also who knows this is the dynamic pricing because the competitors adjust they offer the seats in blocks and ultimately lot many aspects are there which is determining the dynamic prices of different products so in today's context many of the cases we are experiencing dynamic pricing or it could be international pricing suppose so far we have been marketing only in our country India suppose we decide that we shall be making an NT to the Bangladesh so our Indian price will not be the same price for Bangladesh products for the Bangladesh market so our pricing when we decide to go abroad when we decide to go beyond our own country so in that case also we shall have to make adjustments to our pricing decisions so these are the various aspects which we have to consider as far as adjustment of pricing is concerned so dear learners please read your SLM and hope you will be able to understand the basic intricacies of pricing which is very very important for any student of learning thank you very much