Question

Discuss with your class factors affecting pricing decisions. Identify the six stages involved in the process of establishing prices. Discuss why pricing decisions are important to an organization.

Answer 1

Price is not just a figure on a label or an article. Price arises in numerous forms and does many tasks, whether it’s called rent, tuition, fare, or interest.

All through most of history prices were agreed by arbitration between buyers and sellers. Setting one price for all purchasers is a comparatively modern idea. Today the Internet is partly retreating the fixed pricing development. Conventionally, price has functioned as the major element of buyer choice. Price remains one of the most significant essentials defining market share and profitability.

Companies do their estimating in a multiplicity of ways. In small companies, prices are often set by the boss. In large companies, pricing is controlled by division and product-line managers. In larger companies, top management sets general pricing purposes, guidelines, and frequently favors the prices anticipated by lower levels of management. In industries where pricing is a key factor, companies will often create a pricing department to set or support others in defining suitable prices. Many companies do not handle pricing well. Others use price as a crucial calculated tool. There are tailored prices and offerings based on segment value and costs.

Efficiently conniving and executing pricing strategies necessitates a cautious accepting of consumer pricing thinking and a methodical approach to setting, acclimating, and changing prices.

Marketers distinguish that clients frequently dynamically process price statistics, construing prices in terms of their familiarity from previous purchasing know-hows, formal communications, and point-of-purchase or online resources. Purchase choices are founded on how customers identify prices. Consumers may have a lower price entry below which prices may signal low-grade or unacceptable quality. Upper price entry above which prices are too expensive and seen as not worth the money.

A firm must set a price for the first time when it cultivates a new product, when it presents its regular product into a new supply network or geographic area, and when it enters tenders on new contract work. There is a six-step procedure: Selecting the pricing objective. Determining demand. Estimating costs. Analyzing competitors’ costs, prices, and offers. Selecting a pricing method, and selecting the final price.

The company first chooses where it wants to place its market offering. The flawless a firm’s objectives, the stress-free it is to set price. A company can follow any of five major purposes through pricing:

Survival. (Companies follow survival as their key objective when they are overwhelmed with overcapacity, penetrating competition, or altering consumer needs. Survival is a short-run objective.)

Maximum current profit. (Many companies try to set a price that will exploit current profits. They approximation the demand and costs related with substitute prices and choose the price that harvests maximum current profit, cash flow, or rate of return on investment.)

Maximum market share. (Some companies want to make best use of their market share. They trust that a higher sales volume will lead to lower unit costs and higher long-run profit.)

Maximum market skimming. (Companies presenting a new technology indulge setting high prices to exploit market skimming.)

Product-quality leadership. (A company might wish to be the product quality leader in the market.)

Other Objectives: Nonprofit and public organizations may have other pricing objectives. Whatever the specific objective, businesses that use price as a strategic tool will profit more than those who simply let costs or the market determine their pricing.

Each price will lead to a dissimilar level of demand and therefore have a different impact on a company’s marketing objectives. In the normal case, demand and price are inversely related; the higher the price, the lower the demand.

Price Sensitivity. The demand curve shows the market’s probable purchase quantity at alternative prices. The first step in estimating demand is to understand what affects price sensitivity.

Estimating Demand Curves. Most companies attempt to measure their demand curves using several different methods. Statistical analysis of past prices, quantities sold, and other factors can reveal their relationships, Price experiments, Surveys, in measuring the price-demand relationship, the market researcher must control various factors that will influence demand.