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Published by Ameer Abbas

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Published by: Ameer Abbas on Mar 20, 2010
Copyright:Attribution Non-commercial


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Roll No.
Subject Code
1.What is pricing policy? What are the internal and external factors of thepolicy?Ans.
Pricing policy can be defined as astandard procedureused by afirmto setwholesaleandretail pricesfor itsproductsorservices. Pricingpolicy is based upon few factors such as afirm'soverallmarketing  objectives,consumer demand,product attributes,competitors' pricing, and marketandeconomic trends.
Internal and external factors of pricing policy:
Determine primary and secondary market segments.
This helpsto better understand the offering's value to consumers. Segments areimportant for positioning and merchandising the offering to ensuremaximized sales at the established price point.
Assess the product's availability and near substitutes.
Underpricing hurts the product as much as overpricing does. If the price is toolow, potential customers will think it can't be that good. This is particularlytrue for high-end, prestige brands. One client under priced its subscriptionproduct, yielding depressed response and lower sales. The firmunderestimated the uniqueness of its offering, the number of closesubstitutes, and the strength of the consumer's bond with the product. Asa result, the client could increase the price with only limited risk to itscustomer base. In fact, the initial increase resulted in more subscribers asthe new price was more in line with its consumer-perceived value.
Survey the market for competitive and similar products.
Consider whether new products, new uses for existing products, or newtechnologies can compete with or, worse, leap frog offering. Examine all
possible ways consumers can acquire the product. Don't limit the analysisto online distribution channels.Competitors may define one’s price range. In this case, one can pricehigher if consumers perceive the product and/or brand is significantlybetter; price on parity if the product has better features; or price lower if the product has relatively similar features to existing products. Aninformation client faced this situation with a premium product. Its directcompetitors established the price for a similar offering. As the third playerin this segment, its choices were price parity with an enhanced offering ora lower price with similar features.
Examine market pricing and economics.
A paid, ad-free siteshould generate more revenue than a free ad-supported one, for example.In considering this option, remember to incorporate the cost of forgonerevenue, especially as advertisers find paying customers more attractive.To gain additional insight from this analysis, observe consumers interactingwith your product to better understand their connection to it. This can yieldinsights into how to package and promote the offering that can affect onpricing, features, and incentives.
Test different price points if possible.
This is important if we entera new or untapped market, or enhance an offering with consumer-orientedbenefits. To determine price, MarketingExperiments.comtested threedifferent price pointsfor a book. It found the highest price yielded thegreatest product revenue. Interestingly, the middle price yielded greaterrevenue over time, as it generated more customers to whom other relatedproducts could be marketed.
Monitor the market and the competition continually to reassesspricing.
Market dynamics and new products can influence and changeconsumer needs.

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