Question

Topic: Student Questions

Pricing Strategy For Capital Goods

Posted by Anonymous on 1/3/2005 at 8:54 AM ET 250 Points
I would like to know, how or the strategies adopted while pricing the capital goods in an original equipment manufacturing company(OEM's). I also need it to be correlated with a live example, if possible with example of an Indian company
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  • Posted by Peter (henna gaijin) on 1/3/2005 at 8:47 PM Accepted
    The only difference on pricing that I can think of between Capital goods and other products is that capital goods are very expensive. The impact on this is that the sale cycle would be long, and there is potential for discounting (though a good sales org shouldn't need to do this).

    If this is so, then there is no difference for Capital goods and other products in pricing, so the two basic methods are 1) cost based pricing or 2) value-based pricing.

    Cost based pricing involves added up all the costs that go into manufacturing and selling the product, and then adding a profit margin to this. Value based pricing involves figuring out the value of the product to the customer, and then reducing this amount by some level to entice the customer into using the product.
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