Pricing (definition , factors and strategies )

Price - An amount of money charged for a product or service , or the sum of the values that customers exchange for the benefits of having or using the product or service .

Internal factors to consider when setting a price .
a. Marketing objectives
- Marketing positioning influences price strategy
- Other objectives
~ Survival
~Current profit maximization
~Market share leadership

b. Marketing mix strategies
~Pricing must be carefully coordinated with the other marketing mis elements
~Target costing is often used to support product positioning strategies based on price .
~Nonpricing positioning can be used also .

c. Costs
~ Variable cost, Fixed costs and Total Cost
~How costs vary at different production level will influence price setting
~Experience curve affects price .

d. Organizational consideration
~ Who sets the price ?
~ Large companies - Divisional and product line manager
~Small companies - Top management

External Factor
a. The nature of market and demand .
-Pricing in different types of market

1. Pure competition
- There are many buyers and seller who are trading uniform commodity such as wheat , copper and financial securities .
-No single buyers or sellers can charge more than the market price .

2. Monopolistic competition
- There are many buyers and sellers who trade over range of prices rather than a singe market price .
- A range of price occurs because sellers can differentiate their offers to buyers
- Sellers try to develop differentiated offers to different customer segment .

3. Oligopolistic competition
- There are only few sellers who are highly sensitive to each other's pricing and marketing strategies.
-The product can be uniform or non uniform
-There are few sellers because it is difficult for a new seller to enter the market .

4. Pure Monopoly
-The market only consists of one seller .
- The seller maybe is the government or private regulated .
- Pricing is handled differently in this case .

b. Analyzing the price-demand relationship .
-The demand and prices are relatively inversed .
-The consumer with limited budgets will buy less something if the price goes to high .
- There is an exception for the prestige goods

c. Competitors strategies and prices
-Low price-low margin will inhibit competition
-High price-high margin will attract competition

d. Economics condition
- affects the production cost
-affect the buyer perception of price and value
- reseller reaction to prices must be considered .

e. Government & Social concern
-Government may restrict or limit pricing options .
- Government intervention will also influences the pricing strategies .
- Such as subsidies and taxes


Pricing Strategies
a. Market skimming pricing
- Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay for the high price , company makes fewer but more profitable sales .

b. Market Penetration Prising
-Setting a low price for a new product in order to attract a large number of buyers and a large share market .