PPT - Methods of Pricing | Cost Accounting - B Com PDF Download

 Page 1


Methods Of Pricing
1. Value Based Pricing
2. Cost Based Pricing
3. Market/Competitor Based Pricing
4. Customer Demand Based Pricing
Page 2


Methods Of Pricing
1. Value Based Pricing
2. Cost Based Pricing
3. Market/Competitor Based Pricing
4. Customer Demand Based Pricing
1. Value Based Pricing(value optimized 
pricing)
• It is a pricing strategy which sets prices 
primarily, but not exclusively, according to the 
perceived or estimated value of a product or 
service to the customer rather than according 
to the cost of the product or historical prices.
• when products are sold based on emotions 
(fashion), 
• In shortages (e.g. drinks at open air festival on 
a hot summer day) or for complementary
products (e.g. printer cartridges, headsets for 
cell phones)
Page 3


Methods Of Pricing
1. Value Based Pricing
2. Cost Based Pricing
3. Market/Competitor Based Pricing
4. Customer Demand Based Pricing
1. Value Based Pricing(value optimized 
pricing)
• It is a pricing strategy which sets prices 
primarily, but not exclusively, according to the 
perceived or estimated value of a product or 
service to the customer rather than according 
to the cost of the product or historical prices.
• when products are sold based on emotions 
(fashion), 
• In shortages (e.g. drinks at open air festival on 
a hot summer day) or for complementary
products (e.g. printer cartridges, headsets for 
cell phones)
1. Value based Pricing 
• Value-based pricing in its literal sense implies basing 
pricing on the product benefits perceived by the 
customer instead of on the exact cost of developing 
the product. For example, a painting may be priced as 
much more than the price of canvas and paints: the 
price in fact depends a lot on who the painter is. 
Painting prices also reflect factors such as age, cultural 
significance, and, most importantly, how much benefit 
the buyer is deriving. Owning an original Dalí or Picasso
painting elevates the self-esteem of the buyer and 
hence elevates the perceived benefits of ownership
Page 4


Methods Of Pricing
1. Value Based Pricing
2. Cost Based Pricing
3. Market/Competitor Based Pricing
4. Customer Demand Based Pricing
1. Value Based Pricing(value optimized 
pricing)
• It is a pricing strategy which sets prices 
primarily, but not exclusively, according to the 
perceived or estimated value of a product or 
service to the customer rather than according 
to the cost of the product or historical prices.
• when products are sold based on emotions 
(fashion), 
• In shortages (e.g. drinks at open air festival on 
a hot summer day) or for complementary
products (e.g. printer cartridges, headsets for 
cell phones)
1. Value based Pricing 
• Value-based pricing in its literal sense implies basing 
pricing on the product benefits perceived by the 
customer instead of on the exact cost of developing 
the product. For example, a painting may be priced as 
much more than the price of canvas and paints: the 
price in fact depends a lot on who the painter is. 
Painting prices also reflect factors such as age, cultural 
significance, and, most importantly, how much benefit 
the buyer is deriving. Owning an original Dalí or Picasso
painting elevates the self-esteem of the buyer and 
hence elevates the perceived benefits of ownership
Example
• The fashion industry is an example of a sector 
where value-based pricing is common. If a 
particular designer becomes popular, the 
designer can charge more for the goods they 
create than if they were not as popular.
Page 5


Methods Of Pricing
1. Value Based Pricing
2. Cost Based Pricing
3. Market/Competitor Based Pricing
4. Customer Demand Based Pricing
1. Value Based Pricing(value optimized 
pricing)
• It is a pricing strategy which sets prices 
primarily, but not exclusively, according to the 
perceived or estimated value of a product or 
service to the customer rather than according 
to the cost of the product or historical prices.
• when products are sold based on emotions 
(fashion), 
• In shortages (e.g. drinks at open air festival on 
a hot summer day) or for complementary
products (e.g. printer cartridges, headsets for 
cell phones)
1. Value based Pricing 
• Value-based pricing in its literal sense implies basing 
pricing on the product benefits perceived by the 
customer instead of on the exact cost of developing 
the product. For example, a painting may be priced as 
much more than the price of canvas and paints: the 
price in fact depends a lot on who the painter is. 
Painting prices also reflect factors such as age, cultural 
significance, and, most importantly, how much benefit 
the buyer is deriving. Owning an original Dalí or Picasso
painting elevates the self-esteem of the buyer and 
hence elevates the perceived benefits of ownership
Example
• The fashion industry is an example of a sector 
where value-based pricing is common. If a 
particular designer becomes popular, the 
designer can charge more for the goods they 
create than if they were not as popular.
1. Value Based Pricing
• Value > Price > Cost
• Price > Value > Cost
• Price > Cost > Value
• Price = Value > Cost