pricing products

Topics: Pricing, Marketing, Costs Pages: 9 (4434 words) Published: November 1, 2014

Pricing productsIntroduction Products and services have a price just as they have a value. Many non-profit and all profit-making organizations must also set prices. Pricing is controversial and goes by many names: Price is all around us. You pay rent for your apartment, tuition for your education. The airline, railway, taxi and bus companies charge you a/are; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow ; the guest lecturer charges an honorarium to tell you about a government official who took a bribe to help a shady character steal dues collected by a trade association. Clubs or societies to which you belong may make a special assessment to pay unusual expenses. Your regular lawyer may ask for a retainer to cover her services. The 'price' of an executive is a salary, the price of a salesperson may be a commission and the price of a worker is a wage. Finally, although economists would disagree, many of us feel that income taxes are the price we pay for the privilege of making money. In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. How are prices set? Historically, prices were usually set by buyers and sellers bargaining with each other. Sellers would ask for a higher price than they expected to get and buyers would offer less than they expected to pay. Through bargaining, they would arrive at an acceptable price. Individual buyers paid different prices for the sane products, depending on their needs and bargaining skills. Definition of pricePricing is the amount of money charged for goods or service. Price is the sum of all values that consumers exchange for the benefits of having or using the product or service. Pricing is the only marketing mix element that produces revenue. All other marketing mixes represent cost. It is important for marketers and manufactures to have an understanding of price. Charging too much chases away potential customers charging too little can leave a company without enough revenue to maintain the operation properly. Price should align with value

H

M
L
Missed opportunities
Price = cost Unharvested value

Low medium high Value received Most common mistakes in pricingToo cost oriented

Prices that are not revised to reflect market changes
Pricing does not take the rest of the marketing mix into account Pricing that are not varied enough for different product and market segment Factors affecting pricing decisionInternal factors influencing pricing decisions1. Marketing influencing pricing decision Survival – Companies troubled by too much capacity, heavy competition, or charging consumer wants set survival as their objective. In short run, survival is more important than profit.  Hotels often use this strategy when the economy slumps Current profit maximization – many companies want to set a price that will maximize current profits. They estimate what demand and costs will be at different prices and choose the price that will produce the maximum current profit, cash flow or return on investment, seeking current financial outcomes, rather long-run performance. Market-share leadership - other companies want to obtain a dominant market share position. They believe that a company with the largest market share will eventually enjoy low costs and high long-run profit. Thus prices are set as low as possible. Product-quality...

References: Kotabe, Masaki and Helsen, Kristiaan, Global Marketing Management – 3rd Edition, John Wiley & Sons, Inc – Publishers, Copyright 2004, ISBN 0-471-23062-6
Kotler & Keller, Marketing Management - 12th Edition, 2005, ISBN 81-203-2799-3
Theodore Levitt, The Globalization of Markets, Harvard Business Review 61 (May-June 1983): 92-102
Young, Charles E., the Advertising Research Handbook, Ideas in Flight, Seattle, WA, April 2005,
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