Question

. Why is pricing important?

. For each of the following pricing objectives, explain and provide a marketing example.

a. Profit oriented

b. Sales oriented

c. Status quo

3. Explain the importance of “demand” in price determination. Use your basic economic concepts of elasticity and inelasticity to embellish your responses.

4. Define each of the following pricing strategies and illustrate each with a marketing example. You must utilize what you learned about the product life cycle in your response.

a. Price skimming

b. Penetration pricing

c. Status quo pricing

Answer 1

A1.Pricing is important as it reflects status, convenience, brand, quality, and choice. Pricing has a direct impact on a company's revenue and profit. It enables customers that how they see in the product or a service and are willing to pay for a product or a service. Pricing is one of the elements of marketing mix which include product, place, price and promotion.

Pricing is very important as it affects the succes of a company in terms of sales, volume, profit, position and market share. So it is very important for the company to set a right price for any product or service. It affect the whole scenario which are involved in the production, distribution, consumption, volume and profit.

A2. Pricing objectives describes the overall goal and objectives of the organisation. These are

1. Profit oriented- focusses on maximization of profits.

2. Sales oriented- focusses on sales growth and sales volume and maintaining market share.

3. Status oriented- focuses on meeting market competition and price stability.

A3. Importance of demand in price determination-

Quantity demanded in the key factor in the price determination. According to a demand curve, there is an inverse relation between price and quantity demanded of a product which states that when price rise quantity demand falls and when price falls, demand rises. The force of demand and supply determines the price of a product at the equilibrium position where the demand and supply curve intersects.the demand curve is downward sloping due to its inverse relationship between quantity demand and price.

Elasticity of demand is the degree of responsiveness to a change is quantity demand due to the change in the price. The demand is elastic when a small chnage in price leads to hhuge chchange in quantity demanded. The demand is inelastic when a huge change in price leads to small change is quantity demanded. The demand is perfectly elastic, when there is infinity demand due to very little fall in the price. The demand is perfectly inelastic when there is a change in demand, and no change in price. In this case the elasticity of demand becomes zero.

A4. The pricing strategies are

1. Penetration pricing- in this strategy, prices are set low in the initial phases to attract customers.

2. Price skimming - pursue profit margin maximisation. In this strategy, prices are set high initially and then lowers it over the period of time.

3. Status quo pricing. Under this strategy, price are set at the same level as of competitors.

The other pricing strategies are

4. Bundle pricing

5. Competition pricing

6. Value pricing

7. Premium pricing

8. Optional pricing