Pricing is one of the most important elements of the marketing mix as it is the only mix, which generates a turnover for the organization; the remaining 3p's are the variable cost for the organization. It costs to produce and design a product; it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship (Constantinides, 2006). Pricing a product too high or too low could mean a loss of sales for the organization. Pricing should take into account the following factors: •
Fixed and variable costs
Proposed positioning strategies
Target group and willingness to pay
An organization can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve. 1.
Penetration pricing- Is where the organization sets a low price to increase sales and market share. 2.
Skimming pricing- The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. 3.
Competition pricing- Setting a price in comparison with competitors. 4.
Product Line Pricing- Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits. 5.
Bundle Pricing- The organization bundles a group of products at a reduced price. 6.
Psychological pricing- The seller here will consider the psychology of price and the positioning of price within the market place. 7.
Premium pricing- The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, Porsche etc. 8.
Optional pricing- The organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car industry (Constantinides, 2006). Pricing is also a very important aspect for Reliance Communications to address. As technology grows into to the 3rd generation so does the competition. It is becoming ever cheaper for mobile phone network providers to provide different services to the consumers or subscribers. These days’ mobile phones and the services are not just mobile phones but rather small portable computers, and almost every network operator tries to provide variety of services to its subscribers. At the introductory stage reliance will cost their services to capture their target customers i.e. the families. The prices will be comparatively low from the other service providers and will include different kind of “free stuff” i.e. free talk-time, free web browsing and free text messages. This will low price strategy will help Reliance Communications to make a space for themselves in the market. As soon as Reliance communications release their services, other service providers will try to compete with similar plans to compete with Reliance. However Reliance Communications will try to offer these services not only in the launch stage of their service but also till their growth in the market.
The customer’s perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a service is worth. A service is more than a physical item; it also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that quality is being compromised. It is important when deciding on price to be fully aware of the brand and its integrity. A further consequence of price reduction is that competitors match prices resulting in no...
References: Constantinides, E. (2006). The marketing mix revisited: towards the 21st century marketing. Emerald, Vol 22 No 3-4 Literature review. Retrieved November 2, 2008, from ProQuest database.
Mullins, W., Walker, C., Boyd W. (2004). Marketing Management: A Strategic, Decision Making Approach. [University of Phoenix Custom Edition e-text]. New York: The McGraw-Hill Companies. Retrieved November 2, 2008, from University of Phoenix, Resource, MBAMK/591¬-- Marketing Seminar in Problem Solving Course Web site.
Reliance Communications (2008). Reliance Communications previews. Retrieved November 2, 2008, from http://www.rpl.co.in
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