Making Decisions Are Hard Enough

Price: Pricing decisions should take into account profit margins and probable pricing response of competitors.

The pricing strategy that I chose is marketing objectives. Our company will deliver on this strategy to this stand by competing with our competitor’s stand. Our competitor, Jimmy, manages the Lemonade Stand “Liquid Yellow” charges $1.50 for one cup of lemonade. However, they use artificial ingredients, such as artificial flavoring and coloring, white sugar, etc. My company decided that we want to have a price that is higher than Jim’s price. We decided that we want to charge $2.00 for a cup of lemonade. We decided to charge this price because unlike Jim’s stand, we use all natural ingredients, which cost more than artificial ingredients and are healthier for you than artificial ingredients are. That is my company’s pricing strategy.

A Pricing strategy refers to method companies use to price their products or services. Almost all companies, large or small, base the price of their products and services on production, labour and advertising expenses and then add on a certain percentage so they can make a profit. Pricing strategy in marketing is the pursuit of identifying the optimum price for a product. This strategy is combined with the other marketing principles known as the four P 's (product, place, price, and promotion), market demand, product characteristics, competition, and economic patterns. The pricing strategy tends to be one of the more critical components of the marketing mix and is focused on generating revenue and ultimately profit for the company. The

Competition within the industry as well as market supply and demand conditions set the price of products sold.

Pricing your products is actually one of the hardest decisions for a new business owner to make. Make the prices too high and no one will want to buy. Make the prices too low and you can't make a profit. Not knowing how to price products properly is a common challenge for new business owner. And it is one that can make or break a company.

When trying to determine the correct price, a number of factors must be considered: the market and its segments, the size of each segment, the ability to reach each segment, what distribution channels to target, whether to vary price by segment, the usefulness of promotional offerings, and whether the goal is to skim or penetrate each market.

However, there are several factors for the company to choose its pricing strategy. In this case, it may be better if the company choose to sell its product at $21.50 instead of $15.50. This is due to the fact that price-cutting appears to be not a good strategy in this industry. If every player in the same industry starts to lower the price of their products, every company will end up having the low price, which in turns lead to a low profit margin. Moreover, referring to the calculation in a below table, it also implies that if the price is lower than $12, sales will not be able to cover the variable cost incurred, thus it will bring about a loss in net profit.

Pricing as a strategy (shown below in perceptual map) is used by retailers to differentiate. Some are positioning their price low (Dollar stores) and some at premium like Reed, someuse discounted pricing or everyday low prices (TopVal).

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

Competition within the industry as well as market supply and demand conditions set the price of products sold.

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.

Pricing is one of the four elements of the marketing mix, along with product, place and promotion. Pricing strategy is important for companies who wish to achieve success by finding the price point where they can maximize sales and profits. Companies may use a variety of pricing strategies, depending on their own unique marketing goals and objectives.

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).

However, major determinants of price are - Costs, competition and demand. Based on this there are three major approaches to setting the price of a product. They are:

There are a number of factors to be taken into consideration when setting a price for a product or service. Some of these factors are internal, meaning that they are influenced by the company’s objectives and their organizational structures. Other factors are external, meaning they are shaped by the company’s competitors, the condition of the market, and consumer demand. While it is important to address all of the factors that weigh on pricing decisions, it is wise to pay special attention to the external factors. The reason for this being, that external factors are usually precarious in nature. Often, external factors are only managed by adjusting to the circumstances precipitated by these factors. This could mean either increasing or decreasing your pricing. The pricing modification can either be a permanent change, or one existing for an established period of time.