Implementing Pricing Strategy

Topics: Pricing, Marketing, Cost Pages: 4 (1003 words) Published: April 21, 2011

Implementing Pricing Strategies

Janaina Logan

Strayer University
Strategic Market Pricing – MKT 402
Professor Charla Session-Reed
March 18, 2011

Implementing pricing strategy decisions requires properly addressing organizational issues related to how decisions are made and enforced as well as motivational issues that encourage managers to engage in more profitable behaviors. Pricing decisions are strategic and critical to the success of your company. The prices you charge for your products affect demand, thus causing a ripple effect across your company's output, revenues, costs, and income. With a sound pricing strategy, your company is in a better position to perform.

Implementing Pricing Strategies
| | |Contribution is calculated based on price and costs. Often, we treat these variables as fixed. What are the implications of treating | |uncertain variables as fixed? | |For a given product, the greater your percent contribution margin, the more flexibility you have to set higher prices for some customer | |segments and lower prices for other segments. This enables you to serve not only customers who are willing to pay premium prices but also | |customers that are price sensitive and only willing to pay lower prices. | |Many companies strategically design their cost structure to ensure that their variable costs remain low so they can maintain a high percent | |contribution margin, which enables them to penetrate many market segments of varying price sensitivities. They support these penetration | |strategies with high fixed costs...
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