Pricing Strategies Essay

2689 words - 11 pages

Pricing strategies
Introduction
Without a doubt, finding the right pricing strategy is an important element in running a
successful business.
Pricing is essential but complicated for marketer. An organisation can fail if there is any
mistake in pricing strategy even if all other aspects of marketing strategy are achieved.
Price is not just a number on a tag. It comes in many forms and performs many
functions. Rent, tuition, fares, fees, rates, tolls, retainers, wages, and commissions are all the
price you pay for some good or service.
Despite the increased role of nonprice factors in modern marketing, price remains a
critical element of marketing. Price is the only element that produces revenue; the others
produce costs. According to Kotler, price is 'the amount of money charged for a product or
service'.
A business can use a variety of pricing strategies when selling a product or service. The
price can be set to maximize profitability for each unit sold or from the market overall. It can
be used to defend an existing market from new entrants, to increase market share within a
market or to enter a new market. Businesses may benefit from lowering or raising prices,
depending on the needs and behaviors of customers and clients in the particular market.
Unlike advertising, which overtly disseminates a message, pricing provides a subtler
cue about your company, attracting a particular demographic or making a statement about
your product's value.
How should a company set prices for products or services? How should a company
adapt prices to meet varying circumstances and opportunities? When should a company
initiate a price change? How should a company respond to a competitor's price change? This
essay aims to answer all these questions.

Setting the price
Companies do their pricing in a variety of ways. In small companies, the boss often sets
prices. In large companies, division and product line managers do. Where pricing is a key
factor (aerospace, railroads, oil companies), companies often establish a pricing department to
set or assist others in setting appropriate prices. This department reports to the marketing
department, finance department, or top management. Others who influence pricing include
sales managers, production managers, finance managers, and accountants. Executives
complain that pricing is a big headache-and getting worse by the day.Many companies do
not handle pricing well and fall back on "strategies" such as: "We determine our costs and
take our industry's traditional margins."
For any organization, effectively designing and implementing pricing strategies
requires a thorough understanding of consumer pricing psychology and a systematic approach
to setting, adapting, and changing prices.
In setting a product's price, marketers follow a six-step procedure: selecting the pricing
objective, determining demand, estimating costs, analyzing competitors' costs, prices, and
offers , selecting a pricing method and selecting the final...

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