Pricing

Overview: The article tells that pricing is one of the four “P’s” of the marketing mix. It is a marketing variable that can play a significant role in the success or failure of a product. By understanding the complimentary products, especially alliances that are competitors of each other, one may reduce the customer’s overall cost by suggesting that they choose a different product. Companies should know all of the pricing issues that face the customers and understand where one can help the customers find pricing relief within the entire “system”—not by just discounting the own product. One should establish and continually refine the pricing models and the overall-pricing matrix. Price enables to make the appropriate margins to run a successful business--over the life cycle of the product. The four components of a pricing program include 1) objectives, 2) strategy, 3) structure and 4) price levels. There are over twenty pricing objectives that we might consider. Pricing strategies fall into one of two categories: market-based and cost-based. Implementing a pricing strategy requires a pricing structure. The structure determines A) which product or service will be priced, B) how prices vary for different customers and by products and services and C) the time and conditions of payment. Price levels refer to the actual price charged for each product or service. These prices can vary according to product cost variations over time, the desired value perception, the width of price gaps between options or between volume breaks, and the demand sensitivity (elasticity) within the price range.

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Format: HTML | Date: Jan 2003 | Pages: 1