Price is of fundamental importance as it is the only mix element that
actually generates income. But, before any pricing decisions can be
undertaken it is important that the factors influencing price are
understood. These factors can be categorized as internal and external.
actually generates income. But, before any pricing decisions can be
undertaken it is important that the factors influencing price are
understood. These factors can be categorized as internal and external.
Pricing decision have to be adapted to a variety of situations and market
segments. This calls for a systematic and well-planned approach that will
lead to an acceptable range of price levels. A systematic approach should
lead to a more reasoned and complete picture of available pricing options.
This approach has two main stages; analysis of the pricing environment,
and price determination.
segments. This calls for a systematic and well-planned approach that will
lead to an acceptable range of price levels. A systematic approach should
lead to a more reasoned and complete picture of available pricing options.
This approach has two main stages; analysis of the pricing environment,
and price determination.
Internal factors affecting pricing.
The internal factors affecting price include: company objectives and
strategies (with an emphasis on integration); costs and classification
(including fixed and variable costs); economies of scale; experience
effects; price escalation; and the cost of implementing various pricing
schemes.
The internal factors affecting price include: company objectives and
strategies (with an emphasis on integration); costs and classification
(including fixed and variable costs); economies of scale; experience
effects; price escalation; and the cost of implementing various pricing
schemes.
External influences on price.
A core issue of pricing is the impact of price on demand and sales
volume. Price-volume relationships relate to basic supply and demand
theory and include the effect of branding and stages in the PLC on
demand. Recognition has to be given to the differences between
individual customers and industrial customers. The effect of the
competitive environment on competitive activity is also important
including the structure of the market, level of market concentration and
the existence of competitive advantage. The channel environment, legal
environment, consumer pricing regulations and the international setting
are also key issues in the determination of price.
A core issue of pricing is the impact of price on demand and sales
volume. Price-volume relationships relate to basic supply and demand
theory and include the effect of branding and stages in the PLC on
demand. Recognition has to be given to the differences between
individual customers and industrial customers. The effect of the
competitive environment on competitive activity is also important
including the structure of the market, level of market concentration and
the existence of competitive advantage. The channel environment, legal
environment, consumer pricing regulations and the international setting
are also key issues in the determination of price.
Pricing objectives, in line with company objectives, strengths and
weaknesses, exploit the possibilities of the marketplace. They can be
classified in a number of ways and they provide overall guidance for
pricing decisions.
weaknesses, exploit the possibilities of the marketplace. They can be
classified in a number of ways and they provide overall guidance for
pricing decisions.
One of the step in pricing is the development of a price structure by
applying the foregoing theories. Price levels can be determined by a
number of methods including: simplified decision methods, optimisation
methods, simulation methods, price adjustments, negotiations,
competitive bidding and leasing.
applying the foregoing theories. Price levels can be determined by a
number of methods including: simplified decision methods, optimisation
methods, simulation methods, price adjustments, negotiations,
competitive bidding and leasing.
Pricing strategy versus tactics is where long term pricing structures and
levels are compared with short term or tactical pricing decisions,
including the role of consumer and retail promotions and trade
promotions.
levels are compared with short term or tactical pricing decisions,
including the role of consumer and retail promotions and trade
promotions.
Pricing, for a number of reasons, is expected to become an even more
important decision in the future, not least amongst these are issues
including customization, technological developments, channel pricing
and international pricing.
important decision in the future, not least amongst these are issues
including customization, technological developments, channel pricing
and international pricing.
Pricing is essential to the overall profitability of the organization.
Effective pricing, however, requires a systematic approach starting with a
review of the environmental factors that prevail. The next step is to set
objectives from which the pricing strategy can be developed and adjusted
as necessary.
Effective pricing, however, requires a systematic approach starting with a
review of the environmental factors that prevail. The next step is to set
objectives from which the pricing strategy can be developed and adjusted
as necessary.
There are many ways to price a product. Let's have a look at some of them and try to understand the best policy/strategy in various situations.
Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.
Penetration Pricing.
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom in order to
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom in order to
Economy Pricing.
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
Price Skimming.
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.
penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing.
Psychological Pricing.
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar.
Product Line Pricing.
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar.
Product Line Pricing.
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.
Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.
Captive Product Pricing
Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.
Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.
Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.
Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.
Promotional Pricing.
Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).
Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).
Geographical Pricing.
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.
Value Pricing.
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.
So here after analyzing all the ways of pricing i think my product use Penetration Pricing strategy. Its a new for the company so the price is comparetitively low than other Mp3 providers.For the ultimate goal to get a good market.
But after getting the market i think the price will be rise more and more .And as we know that the product is just now in primary level so it needs time to go further.
1 comment:
You prolong this particular theme though reasonable but you were only asked to come out with the main points to convince your readers because when you start to write long essays, it makes the readers bored and doesn't attract them as well.
Post a Comment