Implementing Pricing Strategy

Pricing Objectives involve specifying the role of price in an organization’s marketing and strategic plans. These

Designing an appropriate pricing strategy is always a challenging task for most corporations, because price is a determinative factor of operating profits. Meanwhile, price can affect customer perceptions and product development. According to the basic economic theory, pricing policy should reflect the product’s costs and the relationship between supply and demand. In addition to the fundamental framework, price settle mechanism should take into consideration the underlying industry environment. For example, pricing in manufacturing is heavily cost-based with the certainty that the costs are fully covered. And conversely, in some particular sectors, there are downsides when price setting relies solely on the variable costs because of the high fixed cost. Based on this judgment, product providers should carry different pricing mechanism under different market conditions. Accordingly, pricing evolves from a purely academic topic related to the economic theories to a profits-maximising instrument involved with marketing practices. All these issues make the price setting problem more

3. Analyze the best price setting process used to establish sustainable and profitable prices for the

Third, the price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number of possible pricing strategies. The most commonly used are:

Indeed, costs should be utilized as a gauge to set the lower bounds of the prices for the products and accommodations you are selling. An efficacious pricing strategy includes elements of several methods. However, regardless of the policy utilized, price must be justified by value to the customer. Recollect, ultimately, customers determine

Since, our costs are going up we must respond with a complimentary pricing strategy that makes up for the lost margin. A good strategy in making a pricing plan is to analyze price elasticity. The more elastic the demand is the greater response to our raising the price will result in a greater decrease in demand. “When demand is elastic—that is Ed >;1—a given percentage increase

Consequently, once you understand your costs and your maximum price, you can make an informed decision about how to price your product or service. (Allen, 2012)

Today’s highly competitive business world forces companies to create different tactics and relatively rely on multiple pricing strategies to conduct business.

We can calculate the expected revenue generated by each pricing strategy, but without cost information, it is not possible to determine the preferred price. The cost concepts we introduce are:

Pricing is very important because it is the only element that generates a turnover for the organization. Price supports the remaining P’s, as they are the variable cost. Pricing is difficult as it must follow the laws of supply and demand. However, the pricing response of competitors must be taken into consideration when

A firm’s pricing decisions reflect the pricing objectives set by management. Some firms pursue the goal of maximizing profits, while others aim to maximize market share. Additional considerations include survival in a competitive market, social and ethical concerns, and image. Important price-setting approaches include cost-oriented pricing and breakeven analysis. For new products, pricing strategies include price skimming and penetration pricing, while tactics include price lining, psychological pricing, and discounting. E-commerce has reintroduced dynamic pricing to the U.S. marketplace, allowing sellers to alter prices on a consumer-by-consumer

Firms in e-commerce, in particular, actively adopt dynamic pricing and experience real growth. For example, E-Bay used a dynamic pricing strategy that sold more than 20 billion dollars worth of goods in 2005 \citep{sahay:07} and Amazon made 3 million daily price changes through the month of November 2013, outperforming other retailers \citep{Dan:14}.

With traditional pricing, problem arises when the product or service takes longer and cost more than planned. Customers will start to question the integrity of the company they chose, and they may think more about the hours instead of the product or service (Altman, 2015). Customer value is the difference between customer-perceived benefits and price, therefore, higher perceived benefit and/or lower price would encourage customers to choose certain products (Leszinski & Marn, 1997). While cost and competition based pricing fail to recognize the importance of customer perception, value pricing takes customers’ value into consideration.

Pricing strategy refers to the steps taken by a company to determine the optimal price for a product. Among the four Ps, pricing strategy is unique in that it is the only one that generates cash turnover for the firm, the other three are expenses (Learnmarketing.net, n.d.). Pricing strategy also has a significant impact on positioning strategy, as price has a great impact on how the consumer will perceive the product. For example, different pricing strategies for two similar goods can affect whether one brand is seen as a premium product over another.

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).