Industrial Marketing

Chapter 11 : Pricing Decisions

 Characteristics of Industrial Pricing

+Types of Prices

+Pricing Methods

+Pricing Strategies

+Factors affecting Pricing Strategy

+Pricing across the PLC

+Competitive Bidding

+Price Negotiation

+Leasing

Chapter Summary

This chapter began with an overview of the characteristics of industrial prices which clearly distinguish it from consumer pricing. The different methods of industrial pricing are marginal pricing which emphasizes marginal costs and marginal revenues, EVC which considers the economic value to the customer, break-even analysis which determines the break-even point, target costing, target ROI pricing, cost-plus pricing, and supply demand pricing.

List price, net price, and geographic pricing are the three important types of prices. The two important pricing strategies discussed are cost-based and market-based strategies. The factors affecting these strategies are company objectives and strategies, competition, cost, nature of derived demand, and legal considerations.

The methods of pricing the product at different stages of the product lifecycle are mainly price skimming, penetration pricing, experience curve pricing, and price leadership strategy. Competitive bidding is the most common process in the business markets. It is used by the purchasing firm to attain reasonable prices. The important types of bidding are open bidding, closed bidding, and informal bidding.

Price negotiation is a process where the price at which the transactions take place is negotiated between the buyer and the seller. We also discussed leasing in this chapter where industrial buyers make a trade off between outright purchases and leasing of machinery or equipment. Two types of lease – operating lease and financial lease, are discussed. Leasing benefits the buyers by reducing the risks of ownership and increasing the ease of upgrading.

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