Discuss Factors Affecting Product Pricing Ih the Uk

The company must factor in that each of their customers has lifetime value, a greater value than a small gain made on first sales. With competition in their sector, more penetration pricing would be appropriate. The penetrating pricing strategy would only make sense to retain customers; the pricing strategy must realize lifetime value, (University of Phoenix, 2011).

Penetrating pricing method is one of the most important strategies used in business organization. The agenda of this strategy is followed by new business with low price for a new product so that it gains a breakthrough in competitive market. The aim of the company is to attract customers by keeping price lower than the already established competitors. It’s typical in mass market product for example chocolates bars, food stuff, household goods etc. Once the company gets stable in the market and the demand of the product increase price eventually increases. Penetration pricing method is good to capture new market. Though in initial stages it creates loss for the company, the hope which remains there is the stability of

Companies can choose many ways to set prices, skimming price strategy where a company sets a higher price than normal and a penetrating price where low initial price is set. “Pricing

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

In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.

In terms of theory, pricing strategies can be defined as businesses choosing one method to appeal to customers to purchase goods and achieve marketing mix according to the assessment of consumer demand and cost analysis (BDS Forum, 2009). For a company, pricing strategies can be made difficultly. If prices of goods are too higher, they may lose market share. If the price is two lower, the company cannot get bigger profit (Bized, 2006). Therefore, before developing a pricing strategy, the company has to consider much more factors. Such as pricing objectives which rely on production cost, barriers to entry, rate of product diffusion and so on, pricing methods including cost-plus pricing, target return pricing, value-based pricing and psychological pricing as well as other factors to make the best price for the firm and the consumer (Net MBA, 2009). Three points of views of pricing strategies can be discussed in the following in this report. Firstly, pricing strategies should

Price skimming; high price is set for a new product on the market (usually for high quality of product)

When setting the final price, we must also consider other factors in our external environment. For example, economic conditions can have a strong impact on the results of our company’s pricing strategies. Economic factors such as inflation, boom or recession, and interest rates affect pricing decisions because they affect both the costs of producing a product and consumer perceptions of the product 's price and value.

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.

Monopolies are a group of business people who act as one. Considerable power is in the company’s ability to set and influence prices. The power is determined by the demand curve cladding the company and with almost no competition. Monopolies have no public ownership.

In this paper, I will cover five different pricing strategies used, by retailers and manufacturers, to sell their products. I will demonstrate how pricing products according to one of the five pricing strategies chosen works effectively for each company.

Making decisions are hard enough already, adding a tough decision to decide on which pricing strategy to choose from brings a great deal of stress to a company and the individuals that has to make the decision. Pricing consist of technique, strategy, planning and eventually success of the item and its number of sales. After carefully reading the background information, I realized that there’s more to pricing than just making a profit. Factors come into play from many different angles. Competitors effect the way companies price their product, the strategic planning of the organization itself effects prices. Weather a company lower its product manufacturing costs or use either a lower or higher material to produce the product effects the price customers are willing to pay. There are multiple pricing strategies that companies use to decide the price of their product, strategies such as; good-value pricing, value-added pricing, and value-based pricing to name a few. Companies have certain cost in which they have to cover when trying to price an item. The three major categories for costs of a company is fixed cost; price that do not vary with production or sales, variable costs; costs that vary directly with the production of the product, and there’s total cost; the sum of the fixed and variable cost for any given level of production (Pearson). Overall, making a decision on how much to charge for certain products requires many factors. Based on my knowledge and understanding on

• Pricing – can you adjust your price to maintain or even gain market share and profitability

In this essay I will asses the key points that influence the pricing of products and how businesses use certain methods to price their products to get the beneficial profits for the company. These include, target pricing, cost based pricing, penetration pricing and skimming. I will furthermore calculate the Break even point for Alpha and consider whether the pricing method used is necessarily the best option for their product and advise them on which method would be best suited for them.

* Monopoly = market in which there is only one producer that can therefor set the prices of its products