Pricing Strategies 1

Running Head: Pricing Strategies

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Introduction

Pricing plays an important role in the success of a product. As we have seen that pricing

of a product is considered a major element of buyer choice (i.e. before buying a product, the

customer always looks at the price first and then decides that whether he/she wants to purchase it

or not).

Developing Pricing Strategy

There are a number of ways through which pricing can be handled. When developing a

pricing strategy for a product it is important for the company to decide where the product needs

to be positioned within the market. In this case scenario, the product needs to be positioned in

the middle (i.e. it is not too expensive or too cheap for example, a Buick which is positioned in

the middle). After deciding where the product is going to be positioned, it is important for the

company to follow the following steps for the development of the pricing strategy. They are as

follows:-

Selecting the Pricing Objective

In this case scenario the objective that has been selected for the product is ‘Maximum

Sales Growth’. This will help the company to maximize its unit of sales.

Determining Demand

It is important for the researchers to determine what the demand of their product is. Here

the demand of the product is elastic, which means that a lower price of a product will lead to

more revenue. (Sandhusen, 2000)

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Estimating Costs

The company will set the price of the product, which will cover the cost of production,

distribution and selling.

Analyzing Cost, Prices and Offers of Competitors

It is important for the researcher to analyze the offers, costs and prices provide by the

competitors which are selling a similar product within the market. After these offers have been

analyzed, then the company will be able to set the price of the product accordingly.

Selecting a Pricing Method

The pricing method that is going to be selected for the product would be ‘Value Based

Pricing’.

Selecting of Final Pricing

It is important before, setting the final price for the product; the company needs to

consider other factors like psychology pricing, the influence of the marketing mix, pricing

policies of the company etc. (Sandhusen, 2000)

Factors That Impact the Pricing Strategy

There are many factors that have the power to influence the pricing strategy of the

company’s product. These factors are as follows:-

 The economics of the business (i.e. performance of the company) can leave an impact on

the pricing of the product.

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 The product itself can influence the pricing strategy (i.e. whether it is a seasonal product

like air conditioners which are sold in the summer).

 Demand level of the product can affect the pricing

 The market is operates in also has the power to leave an impact on the pricing strategy of

the product. (Kotler, 2005)

Pricing Method

The pricing method that is going to be used for the pricing strategy of the product is

‘Value Based Pricing’. Value based pricing actually provides the highest profits in comparison

with other pricing methods. This method actually provides the highest level of quality products

to the customer at a low price. In this case scenario it is important for the company to provide

high quality product from which the customers can receive most value at an affordable price.

This method basically helps the company to become a low cost producer without losing the

quality of the product, plus with low prices it will help to attract a large number of customers

who are conscious about the value they receive from the product. (Kotler, 2005)
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References

Kotler, P (2005), Principles of Marketing. Pearson Education India

Sandhusen, R L (2000), Marketing. Barron's Educational Series