Question

A person argues that a key element of a successful strategy is to find a way to keep your price as high as possible while keeping your costs low, and do it in a way that you cover the largest amount of customers in the short and long term. Please discuss in favor or against with a clear logic.

Answer 1

Answer- A business can only succeed if satisfies the need of the people by making products according to their needs and making services available to them that they desire. Thus, in todays world the products have to be according to the target market’s need and the pricing strategy used should be as appropriate as possible. If the product is wrongly priced then the customers may not buy it. Following is the strategy that a business must follow to gain large number of customers in the short as well in the long run-

•Leadership in cost- Business organisation should have cost leadership by making their products or services as inexpensive than it’s competitors so that people would prefer it over it’s competitors products. In the world where people are price conscious the products which can survive which have their price low. This makes the company more competitive and helps it to gain more customers.

• Setting price as high possible won’t be the right way of pricing. As people only want to give that amount to buy the product that gives it the maximum utility. The utility derived from the product or service or the demand of the product can help to decide what should be the price of the product or service.

• A business must follow the stability strategy if it wants to be in the long run. Only those business houses sustain that follow a stable pricing which is justifiable and the products or services are of utmost quality. Business must sustain and follow a strategy that helps it be in the long run to serve customers. If the prices are set too high in the long short run then people might not prefer it as some competitor may make the same product al a lower cost and sell at a relatively lower price.

• Also, the business must make products that have some feature which isn’t present in the competitors products. This strategy is called the differentiation strategy. The competitors may follow the cost strategy but following or imitating the differentiating strategy is difficult and thus it makes the product unique.

•Another important feauture is to select a target market. Since a product cannot be liked by the whole population. Thus, it is important to select a target market and serve it properly and then to service the other market by making product according to their needs.

So, in a nutsheel it is important to make the products at a lower cost but it is also important to follow a different set of strategies than just to keepnthe prices high and earn profits. Profit is the main objective of the business but not the only one.