Price Determination Strategies

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

Pricing is one of the most important elements of the marketing mix for the MARC. It is the only one of the components that generates revenue, while promotion, place, and product generate cost. Producing, designing, distributing, and promoting products come with expenses.

Pricing is important when marketing a product. The determining factor for the pricing is the material, time to make, amount spent on marketing and promotion of the product. The goal in providing such a product that is moderately

Swing Manufacturing and Steady Manufacturing both operate in the widget industry, but with radically different cost structures. Swing is a capital-intensive, automated manufacturer, while Steady is a labor-intensive "job-shop." Monthly operating data are as follows:

A trip to the mall seems to be a rather easy task; however do we, as people, truly think of the amount of retail establishments we visit, the amount of work utilized to maintain the establishment, or the marketing strategies implemented at said retail establishments. Establishments, especially leading apparel stores, implement various types of pricing strategies, including sales and price reductions to grab the attention of consumers to generate business. Pricing is one of the most difficult elements of the marketing strategy. Pricing is difficult to determine due to the impact it may have on the companies, or retail establishments, revenue or profits. However, how does a company determine what type or pricing strategy to utilize for their company?

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

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

The industry that comes to mind when it comes to competitive advantage pricing is gas stations. Notice that most gas stations do not want to price their fuel much lower than their closest competitors do. As soon as one station raises its price, it is almost certain that the neighboring stations will follow suit within a matter of hours. What is really disturbing is that the gas stations will change their prices on the fuel that is already in the ground.

Pricing is an important factor that determines retailers' profitability. Among many success stories, the airline industry is regarded as one prominent example in which pricing optimization techniques have successfully resulted in increased revenues \citep{Phillips:05}. Other examples include electricity pricing, hotels and rental cars, etc. According to \cite{Sullivan:05}, companies that employ price optimization technique were able to raise their gross margin ranging from one percent to three percent, and in some cases up to ten percent. \cite{Elmaghraby:03} point out the availability of customer data along with decision support tools for analyzing such data as well as new technologies that make price changes easy as the driver for the development of dynamic pricing strategies. %Such strategies change prices as a function of both inventory level and time remaining, allowing the sellers to maximize potential profit with sophisticated price model and to eliminate excess inventory quickly in response to higher inventory levels.

Price has both direct and indirect effects on profit. The direct effect relates to whether the price covers the cost of producing the product. Price affects profit indirectly by influencing how many units sell. The number of products sold also influences profit through economies of scale -- the relative benefit of selling more units. The primary profit-based objective of pricing is to maximize price for long-term profitability. The firms are interested in keeping their prices stable within certain period of time irrespective of changes in demand and costs, so that

McKinsey & Co., 2004 write about the difficulty of pricing an item. The article explains that charging too much for an item is much easier to fix

The price of a product determines that products contributions to profit ability. The motivation in setting a high price is that it creates bigger margins , which in turns lead to increased profits with low prices the opposite happens margins are reduced and there is less contribution from the particular product .The factors which are related to the pricing decision are discussed below:

The process in which organizations determine what they will obtain in exchange for their products is called pricing. Some significant factors for pricing include Market conditions, competition, market place, cost of production and product quality.

Drury (2012) defines strategies as: “courses of action designed to ensure that the objectives are achieved”. This definition alone encompasses the importance of developing certain strategy in the early stages of production in a company; without strategy there is no clear path of how to achieve targets and most likely failure would follow. In this paper different strategic decisions and processes of pricing will be discussed. The author starts with exploring the economic model of pricing with evaluating its strengths and weaknesses. Further on, author looks at pricing from management accounting perspective and illustrates different models of pricing encompassed by Drury.

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).