Price Strategy

2010
M.SC ECONOMICS -
IV
APPLICATION OF PRICING
STRATEGIES IN THE PROJECT
MANAGEMENT
PROJECT
MANAGEMENT
Submitted by:
SHAKIL-UR-REHMAN
Roll # AA-580996
Tutor:
PROF. M. YAMIN
SATTI
APPLICATION OF PRICING STRATEGIES IN THE PROJECT MANAGEMENT M.Sc Economics
The study about the above company where price setting

and strategy is one of the basic need due to big
competitive market where a large number of companies
providing the advertisement & print media facilities to
the Rawalpindi/Islamabad region.
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“APPLICATION OF PRICING STRATEGIES IN

THE PROJECT MANAGMENT”
PROJECT MANAGEMENT (569)
Submitted to: PROF. M. YAMIN SATTI
Submitted by: SHAKIL-UR-REHMAN

M.Sc Economics: Semester – IV
Submission Date: October, 2010
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AL-QURAN
On no soul doth God place a burden greater than it can bear.
It gets every good that it earns, and it suffers every ill
that it earns. (Pray): "Our Lord! Condemn us not if we forget or fall into error;
Our Lord! Lay not on us a burden like that which
Thou didst lay on those before us;
Our Lord! Lay not on us a burden greater than we have strength to bear.
Blot out our sins, and grant us forgiveness.
Have mercy on us. Thou art our Protector; Help us against
those who stand against faith."
(Al-Baqarah)
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ACKNOWLEGEMENT
We are grateful to Allah Almighty who gifted us the ability to learn and write. He
provided us the sources to capture the knowledge and avail the opportunities in the world. We
also wish to acknowledge the love and support of our parents. I offer humble thanks of my
heart to the Holy Prophet (S.A.W), who is forever source of guidance and knowledge for the
humanity.
No words of gratitude are sufficient to express our deep appreciation to our teacher
Sir Prof. M. Yamin Satti for giving his precious time and cooperation to us in every respect.
Also thanks to my colleagues who allow going me to anywhere for completion of this
task as well as my friends who helped me to find the data and information from internet and
libraries.
I am greatly thankful to my Mother; her prayers are the key of success for me and her
love with me in every aspect of life.
SHAKIL-UR-REHMAN
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DEDICATION
This entire effort is dedicated to My
beloved Mother, My Late Father, My
Family &
also for My all friends who encouraged
me all the time & their undefined
support to make
this work possible.
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COVERING LETTER FOR PROJECT

To
The Respected Tutor
Prof. M. Yamin Satti
Dear Sir,
Enclosed herewith please find research protocol titled: "APPLICATION OF
PRICING STRATEGIES IN THE PROJECT MANAGEMENT"
Prepared by: SHAKIL-UR-REHMAN
As a pre-requisite for M.Sc in (Subject) of: ECONOMICS
Roll No: AA-580996
Name of Tutor: Prof. M. Yamin Satti
Designation: Professor
Name of Training Organization: SAVOUR FOOD
Department: ACCOUNTS & MANAGEMENT
Yours Sincerely
SHAKIL-UR-REHMAN
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PREFACE
F
or the present day retailer, pricing is a business strategy of great importance,
especially when the seller has market power. The contemporary marketer is keen to
set price at the value of the product in the hands of the customer-rather than merely
by reference to cost. To this end, businesses have gone far beyond the traditional techniques
of haggling. In particular, they have invented more ways of dividing customers into groups,
in order to set differing, group-specific prices. To support this strategy, they sometimes target
particular groups by devising tailored product varieties.
This approach applies not only in markets for new and second hand goods, but also in
markets for personal services – including services offered by members of the professions. In
some sectors, businesses may use group specific pricing as a weapon in dealing with current
(or potential competitors.
The Creators Advertising Pvt.Ltd. is one of the prominent company of printing &
advertising which is working last 10years. Some esteemed organizations & institutes are its
clients e.g. “BLUE LAGOON, RMC, XS-MOBILES, INTERIOR KORNER, ASN
MARBLEX HOUSE, THE PARAGON etc”, the target of the company is to achieve best
status in the market of RWP/ISB and also in entire country. A large number of staff is
working in it, the price strategy is basic & most complicated task for the company to set the
prices according the market and get maximum profit and maintain the quality of the products.
To some extent, the pricing strategies depend on the shortcomings in the customer’s
knowledge of product quality and of available price-offers. Although some of the discussion
depends on basic knowledge of those ideas. Further the conceptual development is kept as
simple as possible, to avoid inessential technicalities.
The purpose of project management to train the students of Allama Iqbal Open University,
Islamabad is to prepare them to face the upcoming challenges and obstacles with great wisdom and
knowledge.
I always thank to Almighty Allah who helped me all the time and gave me concentration and
zeal to finish this assignment. I’ll also like to thank respected Sir Prof. M. Yamin Satti, who gave me
this opportunity to deeply look at things, which I have studied or only heard, and see the Practical
hindrances.
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TABLE OF CONTENTS:
PART - I
Abstract:
Company Introduction & History
Structure of the Company (Portfolio)
Price Technique & Marketing Staff
Objectives & Goals
PART - II
INTRODUCTION:
• Premium Pricing
• Penetration Pricing
• Pricing skimming
APPROACHES TO PRICING:
• Psychological Pricing
• Product Line Pricing
• Optional Product Pricing
• Captive Product Pricing
• Product Bundle Pricing
• Promotional Pricing
• Geographical Pricing
• Value Pricing
PRICE EXECUTION:
• Why pricing tends to be ad hoc
• Pricing as a studying issue
• Emerging best practices in prices execution
METHODS:
• Stockpiling
• Incremental Purchases
• Maximizing Profit through Segmentation
MERITS & DEMERITS:
CONCLUSION:
RECOMMENDATIONS:
ANNEX:
• Targeting Areas & Quality Control
• List of Human Resource of the Company
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ABSTRACT
The price of a product or service is the number of monetary units a customer has to
pay to receive one unit of that product or service’ (Simon 1989). This was the traditional
definition, but in the 1990s a broader interpretation of the price concept became customary.
Illustrative of this broader view is Hutt and Speh's observation that ‘the cost of an industrial
good includes much more than the seller's price’ (Hurt and Speh 1998: 441).
This broader interpretation extends the ‘traditional’ price notion along three
dimensions. First, it recognizes the possible discrepancy between objective and perceived
prices, it is unrealistic to assume that all customers have complete information on amounts to
be paid for market offerings, and psychological processes may affect how price information
is assimilated by customers. Secondly, price need not be specified exclusively in monetary
terms at the time the product is acquired. Product usage may entail additional costs of repair,
maintenance, and energy consumption that should be accounted for.
The study conducted in Creators Advertising Pvt.Ltd., it is advertising company
which is offering print media solution and providing the media solution to its customers on
their door-step as well as trying to demolish the market monopoly of enormous companies
which are providing same work on high rates. The motive of company is to provide the best
solution in the media field. A heavy amount of customers/companies are connected and
working with it for many years. For last 10 years, the company gain respected status in the
market due to its low price rates and appreciable quality.
During the working period in the company, I learnt more; how to deal the customer,
Market fundaments, price settlement and management etc.
Recognizing the broad implications of pricing is crucial to managers facing the
pricing decision. First, decision-makers have to account for eventual disparities between real
and perceived prices in targeted customer segments. Also, setting prices may not be restricted
to determining the number of monetary units to be paid for one unit of the product at the time
of purchase. It may encompass the specification of ‘purchase and use conditions’ associated
with monetary price, over the product's life cycle. In brief, the multidimensional view on
prices leads to the recognition that complex pricing schemes may be needed, including a
‘system’ of prices for different types of customers, product packages, and time periods. This
observation is the essence of strategic pricing.
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INTRODUCTION & HISTORY:

Creators Press started its journey from 1996 in Sadar, Rawalpindi, when it was
operating as a small unit with the name of Hadi Press. Stepping towards progress day by day,
finally in 2000 Creators Press was incepted in Raja Bazar, Rawalpindi, but due to big parking
issue it shifted its Head office from Raja Bazar to Circular Road, Rawalpindi.
The history of the company is not old, Mr. Farhan Abbas came Rawalpindi from Lahore and
started the work in Sadar but after 4years he shifted his office in Raja Bazar but now the main office
of Creators Press is in Circular Road.
In starting the work of the company was very limited but passage of time the company decided its
work on vast level. So, now the company is providing all kinds of print media solution on cheep rates.
Right in its teething phase, Creators Press developed its specialty in designing and
printing of quality Wedding Cards, Digital Printing, Sign Boards, Stamps. Quality
printing is another jewel in the crown of Creators Press. We have state of the art printing
machines at our process houses. A large variety of binding and stitching equipment also aid
automation and quality of work.
It is a private company having three major department that are working on their ends very
honestly and fully enthusiasm. They have trained many graphic designers, machine men, cutter and
market staff who they performing their duties in multinational companies as well as local market.
The current working employees of the company are more than 40 (Marketing, administration, and
other staff). The motive of the company is to provide all kinds of printing facilities whatever (Sign
boards, Digital printing, Stamp Making and other printing work under one roof. The market of
RWP/ISB is small but economically strong, therefore the customer who is sitting here is well known
about the current market situation / rates. The dealing among them is a difficult task so the market
staff of the company is very qualified and highly motivated.
Two other branches with different names are working in different places:
1. PRINT ART: Raja Bazar, Rawalpindi
2. PRINT WING: Taxila
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PRACTICAL STUDY OF THE ORGANIZATION

Creators Advertising Agency is small but strong organization having 3 major parts
(Marketing Department, Graphics & Printing Department, and Accounts/Administration/HR). Each
department has strong, active and well trained staff handling the market requirements.
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MERITS OF THE COMPANY

Wedding cards:
This is our specialty. We manufacture Wedding Cards. A random survey has revealed
that out of every ten weddings in Rawalpindi & Islamabad, eight are being invited through
wedding cards of Creators Press. We cover a wide range of Moods and Costs to exactly
match the individual needs of every customer.
Printing:
Creators Press has earned a trusted name in quality printing. Whether it is a simple
single color handbill or some multi color, manifold advertisement campaign, Creators Press
can handle the job at highest level of quality. We have all ingredients of a quality work
available under one roof. Experienced & skilled work force, most modern equipments and
machinery and above all our service with a smile, all these contribute to entire customer
satisfaction.
We also have the full arrangements for security printing and we have already done
some extraordinary jobs for some of our governmental as well as non-governmental clients.
Our quality statement is not only written in bold words at our walls but is also
watched out carefully at every step.
Publishing:
Publishing is another landmark of Creators Press. We have complete facilities of
quality publishing. Two of our speedy machines are devoted for publishing of books with a
variety of book bindery equipment. We also have printed books for some of very prestigious
institutions like RMC, Holy Family Hospital, Punjab Safe Motherhood Initiative Program
and Allama Iqbal Open University. Our publications on Engineering, Finance, Medicine,
Law and Poetry are available in the market.
Stationery:
We have quite a commodious stock of all kinds of stationery items. Especially we
have the largest variety of printed forms and books which are used in our everyday life. e.g.
All sorts of regulatory forms and books, School / College forms and books / registers,
property forms, books and registers are available at Urdu Bazar. Apart from all above we also
have all sorts of stationery items available like desk organizers, painting accessories and other
office use stationery.
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PRICING STRATEGIES
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APPLICATION OF PRICING STRATEGIES OF THE PROJECT

MANAGEMENT
Introduction:
The most important element of an effective market strategy is the ability to maximize
and protect the price of the product. Price is the final measure of customer value and
competitive advantage. Strategic Pricing clarifies the relationship between market
segmentation and price, and delivers the tools your organization needs to stay focused on
value as you determine break-even, define price elasticity, and analyze tradeoffs between
features and price points. Using strategic pricing tools yields a better positioning approach.
Strategic Pricing will help you determine the appropriate price to capture the value you
provide to your customers:
• Understand how costs, competition, and customer values influence the price you
choose
• Determine how customer values drive segmentation decisions, which in turn affect the
benefits customers seek and the price they are willing to pay
• Use tools to conduct break-even analysis, measure price elasticity, and evaluate
features/price trade-offs through relationship analysis
• Identify lifecycles to establish prices for current and future market conditions
• Decide when and how to raise prices
• Address price erosion situations
This study is designed as an introduction to the basic issues and design options in pricing
strategy within natural settings. Price strategy is one of the difficult technique in the business when
you are working in large competitive industry where price setting according the infant investors also
enormous investors. It is also very complicated to set the price for those customers who are very well
known about the market condition as well as printing work. To reduce the cost of the product to get
the maximum profit, but nowadays raising prices of the material, electricity and other things so its
difficult to set the price.
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LITERATURE REVIEW
INTRODUCTION:
Pricing strategies are a sometimes-overlooked part of the marketing mix. They can
have a large impact on profit, so should be given the same consideration as promotion and
advertising strategies. A higher or lower price can dramatically change both gross margins
and sales volume. This indirectly affects other expenses by reducing storage costs, for
example, or creating opportunities for volume discounts with suppliers.
There are many ways to price a product. Let's have a look at some of them and try to
understand the best policy/strategy in various situations.
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Premium Pricing:
Use a high price where there is uniqueness about the product or service. This
approach is used where a substantial competitive advantage exists. Such high prices are
charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.
Premium pricing is the practice of keeping the price of a product or service artificially high in
order to encourage favorable perceptions among buyers, based solely on the price. The
practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume
that expensive items enjoy an exceptional reputation or represent exceptional quality and
distinction.
The use of premium pricing as either a marketing strategy or a competitive practice
depends on certain factors that influence its profitability and sustainability.
Such factors include:
• Information asymmetry (e.g., when buyers have no independent basis to test claims of
"exceptional quality" for a particular product or service -- assuming the concept is well-
defined to begin with);
• Market status as a Luxury good or a Superior good; and
• Market dynamics such as the level of competition and entry barriers.
Penetration Pricing:
The price charged for products and services is set artificially low in order to gain
market share. Once this is achieved, the price is increased. This approach was used by France
Telecom and Sky TV. Penetration pricing is the pricing technique of setting a relatively low
initial entry price, often lower than the eventual market price, to attract new customers. The
strategy works on the expectation that customers will switch to the new brand because of the
lower price. Penetration pricing is most commonly associated with a marketing objective of
increasing market share or sales volume, rather than to make profit in the short term.
The advantages of penetration pricing to the firm are:
• It can result in fast diffusion and adoption. This can achieve high market penetration
rates quickly. This can take the competition by surprise, not giving them time to react.
• It can create goodwill among the early adopters segment. This can create more trade
through word of mouth.
• It creates cost control and cost reduction pressures from the start, leading to greater
efficiency.
• It discourages the entry of competitors. Low prices act as a barrier to entry (see: porter
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5 forces analysis).
• It can create high stock turnover throughout the distribution channel. This can create
critically important enthusiasm and support in the channel.
• It can be based on marginal cost pricing, which is economically efficient.
Price Skimming:
Charge a high price because you have a substantial competitive advantage. However,
the advantage is not sustainable. The high price tends to attract new competitors into the
market, and the price inevitably falls due to increased supply. Manufacturers of digital
watches used a skimming approach in the 1970s. Once other manufacturers were tempted
into the market and the watches were produced at a lower unit cost, other marketing strategies
and pricing approaches are implemented.
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APPROACHES TO PRICING:
Premium pricing, penetration pricing, economy pricing, and price skimming are the
four main pricing policies/strategies. They form the bases for the exercise. However there are
other important approaches to pricing.
Psychological Pricing:
This approach is used when the marketer wants the consumer to respond on an
emotional, rather than rational basis. For example 'price point perspective' 99 paisa not one
Rupee.
Optional Product Pricing:
Companies will attempt to increase the amount customer spend once they start to buy.
Optional 'extras' increase the overall price of the product or service. For example airlines will
charge for optional extras such as guaranteeing a window seat or reserving a row of seats next
to each other.
Captive Product Pricing:
Where products have complements, companies will charge a premium price where the
consumer is captured. For example a razor manufacturer will charge a low price and recoup
its margin (and more) from the sale of the only design of blades which fit the razor.
Product Bundle Pricing:
Here sellers combine several products in the same package. This also serves to move
old stock. Videos and CDs are often sold using the bundle approach.
Promotional Pricing:
Pricing to promote a product is a very common application. There are many examples
of promotional pricing including approaches such as BOGOF (Buy One Get One Free).
Geographical Pricing:
Geographical pricing is evident where there are variations in price in different parts of
the world. For example rarity value, or where shipping costs increase price.
Value Pricing:
This approach is used where external factors such as recession or increased
competition force companies to provide 'value' products and services to retain sales e.g. value
meals at McDonalds.
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PRICE EXECUTION:
Pricing execution – the development of pricing strategy and the implementation of the
strategy, as reflected in the consistency and success of sales efforts and proposals is often
invisible to those outside a firm. Companies are reluctant to share information about their
pricing successes publicly, lest their rivals find out. However, Wall Street analysts collect
such information assiduously because “pricing execution” turns out to be an area with large
and rapid payback – often delivering a three to ten times payback on investment derived from
significant improvement in revenues, margins, profits and shareholder valuation. Just as
importantly, increased profitability increases the strategic resources available to grow the
firm.
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Surprisingly, surveys suggest that in spite of the large upside available at low risk,
few companies are pursuing systematic revenue enhancement through pricing execution.
While many companies are currently experimenting with price optimization models, AMR
Research survey suggests that only three percent of the firms it surveyed are attempting
pricing execution management.
While as a group these tools are still generally immature, and the companies building
them often at early stages of development, the payback from successful implementation is
frequently so high that it's an obvious target for potentially rapid profit improvement. Pricing
is now a dramatically different area than it has been historically. New software tools give
companies a new way of setting, optimizing, and enforcing pricing changes within the
organization. With the best tools, an integrated view of customers, their past purchases,
benchmarked pricing by segment and size of purchase, relationship data, and comparison of
trends over time – all are available to provide decision support to field sales representatives,
sales managers, marketers and general managers.
Pricing as a strategic issue:
Think of pricing as falling into four “buckets”:
1. Setting pricing strategy for an existing business.
2. Setting pricing strategy for a new business model.
3. Managing pricing for a new business model.
4. Managing pricing for an existing business model.
All these choices need to be addressed by firms. But Bucket 4, the apparently dull and
unglamorous management and execution of prices for the existing business, should not be
overlooked. If CEOs and other leaders make it a priority, companies can find surprisingly
large opportunities by focusing upon pricing execution and the difference between the pricing
set and the pricing received or “pocket pricing”
There are many strategic advantages to more systematic pricing execution
management. One-to-one marketing, customized pricing, development of tailored pricing
models, and tracking of demand elasticity are all difficult to manage without a centralized
information source. Segmented pricing promotions, linking pricing to installed-base
marketing and generational upgrade strategies are all made easier by having a systematic
approach to tracking and displaying pricing experiences across time periods, customers,
products, segments and sales staff. Information about failed bids and sales attempts provides
intelligence about potential strategy failures.
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Because pricing is intimately connected to customer perceptions of value, solid

understanding of pricing execution can often reveal opportunities to reevaluate value chains
and value propositions. The “noise” in pricing information from relatively random pricing
execution often conceals emerging segmentation opportunities and shifts in value perception.
Emerging best practices in pricing execution
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The desire to simplify and systematically address the processes around order
processing and pricing has led to a new set of best practices in pricing. In some organizations,
a new role has emerged with the title “VP Order to Cash,” and the responsibility for focusing
upon optimizing order and collection processes.
But the most important driver of change is the emergence of a new category of
integrated pricing management software. The goal of such software is to make explicit four
key processes in the organization:
1. Setting pricing policy. The documentation and standardization of rules for
automating, assisting and providing feedback to field sales and sales managers of the
list prices and suggested discounts for different categories of buyers, segments,
industries and purchases.
2. Optimization of the quote. The optimization and speed up of the development of
individual quotes and proposals by providing easy access to comparable price quotes
to ensure that proposed pricing is consistent with policies, and consistent with other
benchmarked data on a particular client, comparable clients and comparable orders. A
typical system will show a regression line and scatter chart to make it easy to identify
pricing trends by size or over time for a comparable selection of quotes.
3. Enforcement of pricing policies. The software manages explicit approval processes to
ensure the “enforcement” of pricing policies within the organization. The software
also manages approval of the inevitable exceptions to pricing policies, with different
levels of supervisors having different ranges of approval authority.
4. Analyzing customer profitability. With detailed information available about
individual transactions, relationships, segments, regional and product line
profitability, resource allocation decisions should be driven by the actual profitability
of transactions and relationship (based on the “pocket” price) rather than the less
precise “theoretical” profitability of customers if they had been paying list price.
The pricing-software industry – what's out there?
There has been an explosion of applications in the pricing management space. Some
are stand-alone applications. Some are add-on modules from large integrated vendors such as
SAP, SAS or Siebel. A proprietary 2005 Deloitte study of the available applications
concludes that no one vendor offers a complete integrated solution. A detailed analysis of the
leading vendors, ranking them on price analytics, price optimization, price execution, long-
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term vendor viability, and product potential suggests clearly that different vendors have
different areas of strength that vary widely in appropriateness for different industries
In evaluating a potential vendor, client companies should address the following issues:
• Check with the existing customers offered as references by the software vendors.
Some vendors offering the software with the most features are small and less
experienced.
• As with many integrated software packages, vendors may claim more functionality
than they can deliver. Validating the competitive claims of many vendors can be time
consuming. But the biggest risk is that a pricing project will require expensive and
time-consuming software customization to compensate for missing functionality in
the vendor's product.
• Software packages vary widely in their capabilities in terms of the three key areas:
price setting, price optimization and enforcement. Some vendors are very good at one
area, but few have superior capability in all three areas.
• Beware of software that doesn't serve your industry-specific needs. Pricing software
that was originally designed for other firms in other industries may not work equally
well for your business.
• Many pricing management software vendors have “share of revenue” arrangements
with the consulting firms that implement their software product. This approach tends
to bias the software selection process. A consulting firm that doesn't favor a particular
vendor is likely to make better recommendations and be more likely to implement a
tool that does not require extensive customization work.
How to realize value from using pricing software and tools
As with any change in the selling process, improving pricing execution is rarely
successful without an integrated approach to change. Integrated pricing management software
enables superior pricing performance, but it does not guarantee it.
Companies that provide incentives to field sales representatives for selling the most
profitable products in their line need to tackle price increases in two steps. In the first phase,
to achieve a dramatic improvement they must change the culture of the company by offering
evidence that price increases won't threaten incentive compensation. In one project, the
management team reframed the perceptions of the key sales representatives who develop
quotes by using the pricing software to show the following kinds of information:
• Average price paid for the product at this quantity level.
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• Average priced paid by this customer in the past.

• Predicted price that the customer would pay.
• Estimated highest price that the customer would pay.
• Estimates of commissions based upon the four potential prices listed above.
Convinced by the data, over time a small number of sales reps became more confident
that they could quote the higher prices and still win the sale. In the second phase, this core
group was able to influence other sales reps and persuade them to abandon their more
conservative quoting practices.
A systematic change management process can help companies make explicit the
pricing procedures, the roles and responsibilities, the metrics and rewards, and the tools and
technology required for improving performance.
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Figure
Figure 1:
1: Price
Price waterfall
waterfall analysis
analysis
Figure
Figure 2:
2: Establishing
Establishing price
price negotiation
negotiation ranges
ranges
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Figure
Figure 3:
3: How
How do
do these
these pricing
pricing models
models compare?
compare?
Figure
Figure 4:
4: Different
Different pricing
pricing approaches
approaches Vs.
Vs. customer
customer
goals
goals
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Table
Table I:I: Pricing
Pricing management
management software
software installations
installations 2003-2006
2003-2006
(Rs.
(Rs. Millions)
Millions)
Table
Table II
II Four
Four types
types of
of pricing
pricing issue
issue
Table
Table III:
III: Selected
Selected independent
independent pricing
pricing management
management vendors
vendors
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Pricing model complexity in high-tech industries is increasing:

The benefits of improved pricing execution are likely to be high in rapidly changing
industries, such as high-tech segments where new business models appear frequently or old
models get re-invented, and customers have a large variety of purchase options.
One VP at a major software company made a wry comment about its pricing
approach: “We have never met a pricing model we did not like.” A menu of high tech pricing
options might include:
• Named user pricing. Each user in the organization pays a price based on usage,
similar to the concept of a “personal copy” of MS-Office or Open Office. To confuse
things further, over different time periods, the company may change the number and
types of users that it licenses, making comparisons difficult. Users might be “read-
only users,” “developer users”, “administrative users,” etc.
• Tiered pricing. Price per user varies depending upon the number of users.
• Hybrid pricing. A combination of a fixed and variable cost for usage of the product.
• Concurrent user pricing. Pricing is based upon the number of users actually connected
to the server at any one time.
• CPU pricing. Software pricing is tied to the number of computers on which it is
running.
• Bundled pricing. The firm offers a lower price for a bundle of products.
• Upgrade pricing. A price on the upgrade from one generation of software to another.
• Site license pricing. A price the customer has negotiated for an overall enterprise
license for the use of the software.
With such complexity, high-tech companies operating without pricing management
software support have difficulty figuring out:
• What the price elasticity is for its various products.
• Where money is being left on the table or where overcharging might be occurring.
• Where sales representatives are doing a good job of using discounting to create a
bundle of products that fit into the available budget of the client in order to achieve an
effective outcome and create high customer satisfaction.
• Where pre-bundling of options might simplify customer-buying decisions and lock in
customer relationships.
• The potential impact of newer pricing approaches such as subscription and usage
based pricing.
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Clearly, tools for centralizing pricing information and policies – modeling, business
intelligence tools, data-mining tools and integrated pricing management software – make
sense for most industries with large sales forces. The tools make even more sense for
companies with complex product lines and a variety or increasing number of pricing models.
But pricing software is being used across a wide range of industries.
As companies start to tailor pricing and incentives to meet strategic sales and channel
objectives, the analytical complexity can increase dramatically and increase the benefit of
using integrated software for supporting pricing data. Without solid data on market test
results to support modeling, management teams will disagree on the likely outcomes
triggered by introducing different pricing approaches for different channel members and
segments. Debates about predicted outcomes can slow down decision making and
implementation.
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STRATEGIC OBJECTIVES
Different pricing models support different kinds of strategic objectives. While it is
hard to generalize about every company and industry, and illustrate how different pricing
approaches for a high tech company could support marketing and strategic goals for a
company.
So what should the CEO do?
• Educate the senior management team on the opportunity that pricing management
represents. Signal that turf wars are not an acceptable response to the pricing
execution initiative.
• Make pricing a priority in the organization and provide visible CEO sponsorship.
• Set up a Program Management Office to select, test, and implement a pricing
execution management program. Such an office should have as its mission the task of
introducing and making successful the software, processes, training and monitoring
for improved pricing processes, and capabilities. A key task for the project office will
be to select the right software, demonstrate early success and build upon such early
successes.
• Establish complementary business intelligence support to simplify the process of
designing, testing, and refining targeted pricing promotions.
• Establish a business-intelligence Center of Excellence to facilitate the use and
improvement of pricing data in the organization.
• Have the organization develop capabilities that will support one-to-one marketing,
pricing, and sales.
Pricing execution offers both growing and mature companies a lower-risk approach to
revenue, margin, profit, and shareholder-value growth than innovation and acquisitions. And
where companies are creating innovative business models and making acquisitions, improved
measurement combined with better pricing execution can help the organization generate
better financial outcomes from these generally more uncertain initiatives.
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PRICING STRATEGIES IN PROJECT MANAGEMENT:

The decision of how to price your product will make or break its acceptance by the
marketplace. End-user pricing should drive your project management from the beginning, to
ensure that your cost of goods does not eat into your profit margin. We'll discuss the three
major methods of pricing strategy.
1. WHAT THE MARKET WILL BEAR?
It means "the highest price you can sell your goods at in the market you are in". You
need to know what your competition is selling their products at in order to get a guideline.
How to Charge What the Market Will Bear?
When it comes to setting fees for your consulting services, why not just round up the
usual suspects and ask them? Because your friends are ignorant, your clients are sitting on the
wrong side of the table, and you're likely to sell yourself short. What you really need to do is
analyze your position in the marketplace and establish your rates accordingly.
Lucky for you, we've rounded up some of the best sources of hard data and sage
advice on going rates in various disciplines of consulting and freelancing. Prepare to surf
your way to a bigger income.
Information Technology:
In the field, consultants say that even in the superheated market for IT experts, the
cooling economy is having an effect. "I'm feeling downward pricing pressure from my
clients," says Margarett Langsett, executive vice president at recruiter Virtual Corp. in
Flanders, New Jersey. When Langsett recently called an employer to ask that a contractor's
$70 hourly rate be increased, the employer balked and said that new talent is being capped at
$68 per hour.
Business Consulting:
Business consultants are feeling similar pressures. "People are going to be hungrier
for work," says Marsha Lewin, a Los Angeles–based technology strategist and author of The
Overnight Consultant. "But it's not a smart idea to lower your fee."
A better strategy is to build your best clients' loyalty to you by offering them a little
something for nothing. Do this by performing a service and adding it to your next invoice as a
separate line item with a big "$0" next to it. This way, when the demand for your services
heats up again, you don't have to hit the client with a fee increase just to get back to where
you started.
For hard data on consulting rates, fork over $25 for the July 2000 survey by the
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Professional and Technical Consultants Association. One interesting tidbit from the survey:
For consultants who have been in the business for at least five years, rates appear to be
independent of length of experience. Consultants with five to 10 years of experience average
$130 per hour; those with 25 to 30 years make $129 hourly.
Journalism:
For trade and consumer magazine writers, the National Writers Union's media rates
database is the labor activist's choice. The catch is that you must belong to the union to view
the member-reported database; the sliding scale of dues is $95 to $260 per year. A more
economical alternative is the classic reference Writer's Market 2001 and its companion Web
site. Site subscriptions are $30 per year; the book-and-site combination is $50. Who pays
$4,000 to $6,000 for a 3,000-to-5,000-word story? Travel & Leisure.
Graphic Design:
The authoritative source on rates for graphic-design projects is Graphic Artists Guild
Handbook: Pricing & Ethical Guidelines. The 10th edition of the book, published in March
2001, includes rate ranges for a wide variety of projects. For example, the suggested fee for a
full-page color illustration for a medium-sized corporation's annual report is $1,500 to
$4,000.
Marketing and Public Relations:
Public relations professionals seldom find themselves at a loss for words. But that's
the state that we induced when we asked the Public Relations Society of America for a
resource on standard PR consulting rates. Rates were "basically way too messy for us to get
into," due to geographic variation and other factors, a spokesperson told us. Other key PR
organizations were also unable to help.
The situation is similar in the field of marketing. Marcia Yudkin, a Boston-based
marketing consultant who recently raised her rate from $150 to $200 per hour, does offer this
advice: "People who have the confidence to charge more usually get more. When people do
take that leap, they often find business picks up. They get higher-quality clients, and they're
perceived differently."
In an ideal world, the results of your project will be billed or sold at the highest
possible rate that your customers are willing to bear. If you bill $500 for an item for which
the customer would be willing to pay $1,000, you've left the remaining potential profit on the
table. Worse still, a product that is too far under priced may induce a belief that it is somehow
substandard.
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This model, therefore, pegs the price of your product to its highest possible value. There are
many ways to determine what this might be: competitive market research, focus groups, or an
on-demand pricing model where different customers are privately offered different pricing,
until the best possible price is determined.
If you intend to use this model, it's best not to skimp on your raw materials--plan for a high
cost of goods, and an equally high profit margin on that investment. Any part the customer
can see in the finished product should give an impression of quality which merits the overall
price.
2. CORNERING THE MARKET:
It means that to acquire enough shares of a particular security in order to manipulate
its price. The illegal practice of attempting to purchase a sufficient amount of a commodity or
security to manipulate its price.
Cornering the market is a business strategy that involves gaining a sizable degree of
control on a given commodity or security. Essentially, an investor or a company will
purchase as many units of the relevant commodities or securities as possible. This
creates a situation where the majority holder of the commodity or security possesses a
monopoly on the product and can thus have a tremendous amount of control over the sale
price.
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METHODS
a). Stockpiling
One of the most commonly utilized methods of working toward cornering the market
is to engage in what is known as stockpiling. Essentially, stockpiling is quietly going about
the business of purchases small lots of the commodity from various sources. Choosing to
purchase in smaller lots provides two advantages for the investor. First, the smaller purchases
are less likely to rouse attention from other investors, who could move to also begin buying
up available units and thus slow down or even derail the effort at cornering the market.
b). Incremental purchases:
Second, incremental purchases will often allow the investor to gain at least a
substantial share of the market place before it is necessary to file documents with any
government entity that reveal the intent to attempt to control the market.
Alternately, you can attempt to undercut your competition, and in so doing, corner the
market by capturing most of its potential sales. Revolutionary pricing is usually better at this
than merely coming in at a 10 percent to 20 percent discount; your customers will pay much
more attention to your offering if you bring in people previously priced out of the marketing
model.
Some manufacturers do this by selling their initial product at cost, or even at a small
loss, but by locking in the ancillary sales necessary for their product to work. This is
sometimes called the "razor blade" model of pricing. But be careful that you don't undercut
your own product: consider the iPod, which is competitively priced as a high-quality product,
but which also sees ancillary sales through the iTunes Media Store.
Project management for this model should focus on low cost of goods, and leveraging
high-volume, low-cost supply chains. This is a risky endeavor until you reach high-volume
sales, so be sure you're capitalized to take losses until you reach those targets.
Attempts to corner the market have occurred with all sorts of commodities. From
cattle in the 19th and early 20th century to silver in the latter 20th century, cornering the
market has continued to capture the attention and imagination of many persons who are very
successful in various types of businesses. In some cases, the effort would result in a
temporary market advantage that would ultimately be minimized by general economic
conditions and changing consumer tastes. At other times, the effort would result in massive
losses that would take years to recover.
DRAWBACKS:
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Cornering the market is often attempted, but historically has failed as often as the
strategy has succeeded. One of the reasons for this is that as the unit prices begin to rise as a
result of the increased demands of the primary holder of the commodity, consumers may
simply choose to cut back on usage of the commodity, effectively cutting the demand. In
order to lure consumers back, prices may have to be cut to the point that the unit price is
below the price paid at the point of acquisition. Rather than gaining a monopoly on the
market, the investor ends up losing money on the attempt.
3. MAXIMIZING PROFIT THROUGH SEGMENTATION:
One common method of splitting the difference of the above two models are through
market segmentation: determining several pricing points for your product, and selling several
versions of that product for each pricing point in the market. Every major item from cars to
computers is sold on exactly this model.
However, consider whether the complexity of marketing such a product is worth the
result. An overly complex product grid can paralyze your potential customers at the point of
purchase, and send them to competitors with simpler, and more coherent, product lines.
Optimization of your marketing dollar can be achieved through effective segmentation.
Focusing on customer segmentation allows businesses to differentiate themselves by offering
unique services and support to their most valuable customers, without compromising service
standards for other customer tiers. Companies can drive profits and reduce customer churn
through focused strategies by providing the appropriate service for each profitable customer
segment. This session will show how to personalize the relationship between your company
and its most profitable customers through segmentation.
1. Identifying the most effective criteria for segmenting the customer base
2. Translating customer segmentation into targeting and messaging to the most profitable
customers
3. Designing relationship programs to meet target segment needs
4. Measuring the performance of your segmentation to drive your relationship management
programs
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CONCLUSION:
When marketers talk about what they do as part of their responsibilities for marketing
products, the tasks associated with setting price are often not at the top of the list. Marketers
are much more likely to discuss their activities related to promotion, product development,
market research and other tasks that are viewed as the more interesting and exciting parts of
the job.
Yet pricing decisions can have important consequences for the marketing organization
and the attention given by the marketer to pricing is just as important as the attention given to
more recognizable marketing activities.
Study during research in organization, I analyzed different ways; how to manage the
organization staff? How to deal with the customer? How to complete the task? The price
strategy in the competitive market is not an easy task. Raising prices of the material but the
customer mind is fixed on old rates, to convince the customer through proper guidelines.
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GLOSSARY:
All u can eat pricing: a site license or enterprise agreement with a fixed price for
unlimited usage (common in large software sales).
Bundled pricing: combining products to offer a lower cost/higher value proposition.
Committed an overage pricing: often used in cell phone pricing where there are
different policies in place for committed minutes per month and minutes over your
limit.
Hybrid pricing: a mix of pricing models most typically a fixed and variable cost
component.
Loyalty pricing: a pricing scheme that rewards customers for frequency or total
volume of purchases.
Optionality: the ability of customer to reallocate their users between different
products in a site license bundle or an “all you can eat” purchase.
Outcome based pricing: often used in consulting firms for projects where the
payment for the project is tied to results.
Subscription pricing: purchase of product or service over a period of time with
supports and upgrades bundled into the relation ship for as long as the subscription is
current.
Upgrade pricing: different pricing for prior customers.
User-based functionality pricing: users can purchase sub components of functionality
at different prices.
Value based: pricing based upon the value created for the client.
***
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The study about the above company where price setting

“APPLICATION OF PRICING STRATEGIES IN

PROJECT MANAGEMENT (569)

Submitted to: PROF. M. YAMIN SATTI

Submitted by: SHAKIL-UR-REHMAN

Submission Date: October, 2010

On no soul doth God place a burden greater than it can bear.

It gets every good that it earns, and it suffers every ill

Our Lord! Lay not on us a burden like that which

Thou didst lay on those before us;

Blot out our sins, and grant us forgiveness.

Have mercy on us. Thou art our Protector; Help us against

those who stand against faith."

love with me in every aspect of life.

This entire effort is dedicated to My

beloved Mother, My Late Father, My

also for My all friends who encouraged

me all the time & their undefined

this work possible.

COVERING LETTER FOR PROJECT

Enclosed herewith please find research protocol titled: "APPLICATION OF

PRICING STRATEGIES IN THE PROJECT MANAGEMENT"

Prepared by: SHAKIL-UR-REHMAN

As a pre-requisite for M.Sc in (Subject) of: ECONOMICS

Roll No: AA-580996

Name of Tutor: Prof. M. Yamin Satti

Name of Training Organization: SAVOUR FOOD

Department: ACCOUNTS & MANAGEMENT

INTRODUCTION & HISTORY:

PRACTICAL STUDY OF THE ORGANIZATION

MERITS OF THE COMPANY

APPLICATION OF PRICING STRATEGIES OF THE PROJECT

Because pricing is intimately connected to customer perceptions of value, solid

• Average priced paid by this customer in the past.

Pricing model complexity in high-tech industries is increasing:

PRICING STRATEGIES IN PROJECT MANAGEMENT:

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