Marketing Mix Paper – Price
Pricing is the amount of money that customers are willing to pay a business for a good or service. There are a lot of contributing factors that businesses must take into consideration when it comes to effectively setting a price for a good or service. It includes direct and indirect cost as well as opportunity cost. Pricing is one of the most important elements of the marketing mix. It is the only one of the components that generate revenue, while promotion, place, and product generates cost. Producing, designing, distributing and promoting products come with expenses. Pricing must support the other elements of the mix. Pricing can be difficult since it must also support the supply and demand relationship. Pricing a product to high or low could mean a loss of sales. There are several factors that should be taken into consideration when setting prices such as; target group, customer willingness to pay set price, company’s objective, profit, competition, fixed and variable costs, prestige and status quo to name a few. Pricing is an important strategic issue because it is related to product positioning. Although there is no single approach to determine price, some of the following steps can assist in developing a price for a good or service. * Develop a marketing strategy – perform marketing, analysis, segmentation, targeting and positioning. * Make an Marketing Mix decision – define the product, distribution and promotional tactics * Estimate the Demand Curve – understand how quantity demanded varies with price. * Understand Environmental Factors – evaluate likely competitor’s action, understand legal constraints. * Calculate Cost – fixed and variable cost associated with goods or services. * Set Pricing Objectives – profit maximization, revenue maximization, or price stabilization (status quo) * Determine Pricing - using information collected in above steps to select a pricing method, develop the pricing...
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