Avoid Pricing Mistakes
• Pricing is too cost oriented. Companies do not take enough account of the overall market demand and consumer psychology.
• Prices are not revised often enough to take advantage of changed conditions in the marketplace. • Prices are set independently of the rest of the marketing plan.
• Prices are not varied enough for different product items and market segments.
• Prices are set to match or better a competitor without justification or analysis. Types Of Pricing Strategies
The best strategy for you will depend on your firm, your product and your market. Remember that you do not have to use just one of the strategies outlined above. Many firms, in fact, use more than one approach and arrive at a price that represents a reasonable compromise between each of these strategies. 1. Cost oriented pricing: Many firms set product prices largely on the basis of
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Demand oriented pricing: One obvious disadvantage of at least the target-pricing component of cost-based pricing is that sales volume is affected by price. What is missing is a demand function showing how many units the firm could expect to sell at different prices. It is very difficult to quantify how much a price increase or decrease will affect demand. This relationship is called the price elasticity of demand and differs between products. Another approach to pricing is to work backwards from the products perceived value to the buyer, rather than forward from costs. A company develops a product for a particular target market with price, quality and service to match the competition for that segment of the market. Having determined this demand oriented price, the manufacturer then works out whether, allowing for costs, there is sufficient profit on the item to make it worthwhile. There is no formula for working out sales volume at the demand price. This figure has to be arrived at on the basis of experience and a conservative estimate of the market share the product will
And the customer are sensitive to the price since those products are using only few times and need to be change all the time.
According to Epstein and Buhovac, (2014), costing system is a process designed to monitor the costs incurred in a certain business. Costing systems are meant to advise the management on how to choose the most appropriate course of action with cost efficiency and capability. According to Cardinaels and Labro (2009) costing system provides detailed cost information needed by management needs to control current operations with the aim of improving the future. Below are some of the costing systems that are common to many organizations (Epstein & Buhovac, 2014).
Low pricing eventually results in loss of customer loyalty as pricing to bottom is a risky business strategy.
Pricing can play an important role in the success or disaster of any product. Too high a price and the product will fail; too low a price and not enough profits will be made to sustain business operations (Hisrich, Peters, & Shepherd, 2014). The key is to make the customer think that they are paying exactly the right price for the product. Anything else though in this regard means the product is not positioned well in the mind of the consumer. First of all, Gril-Kleen will have to decide on what sort of strategy it needs to pursue. This strategy is decided on three factors namely costs, margins and competition.
Thirdly, option is to strategically adjust the prices of their products because consumers are often very price sensitive. By doing so the company can either create more value that defines the quality and quantity of the product.
Cost-plus pricing lead to a complicated pricing structures, since distributors and customers negotiated separate product prices from manufacturers, introduced incentives, let prices vary from customer to customer, covered some products by contract and some don’t etc.
First of all, penetration pricing is the major determinant of the price and that is employed when the product managers have to give most of the value to the customers and keeps a small margin. Chatime decided use penetration pricing where set a lower price of milk tea than the eventual market price to attract
Moving on towards the various pricing strategies, the first pricing strategy is the differential pricing. This is to charge different prices to different target markets, which is usually not considered illegal in the case of services. The prices charged differ according to the types of customers being served for example children and disabled people usually get a discount on ticket prices.
Depending upon the sales and demand in the market, prices can change for the products.
Today’s highly competitive business world forces companies to create different tactics and relatively rely on multiple pricing strategies to conduct business.
The strategy for setting a product’s price often has to be changed when the product is part of a product mix. In this case, the firm looks for a set of prices that maximizes its profits on the total product mix. Pricing is difficult because the various products have related demand and costs and face different degrees of competition.
Keeping these realities in mind, it is very much obvious that for this market, we choose and follow a value based pricing and do not keep the price of the product too high. It is advisable rather to follow an average pricing and let the consumers build some enthusiasm around the product.
In Dove, we use three types of strategies. Namely, Competition-based pricing, Product line, Product Bundle pricing.
Although consumers noticed it but decided to go along with it as far as the company does not tingles with prices.
Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).