Implementing Pricing Strategies

Implementing Pricing Strategies

Introduction

Price

Price is the amount of money to be given in exchange for goods or services. Price tells us that price is the amount of money allocated to a product or service, or the sum of the values that buyers exchange for the benefits of having or using a product or service (Smith, 2011).

As the price level rises, people who hold money discover that they can buy less with their money. In other words, they experience a decrease in the real value of their wealth held as money. As a direct result, they will buy fewer goods and services as the price level rises (Smith, 2011).

Pricing

Pricing is the process of determining what a company will get in the exchange of product or services. There are some factors are included in pricing such as Competition, Market trends, Economical condition, Consumer behavior according to the relevant product category and financial condition of the company(Hollensen, 2010).

Pricing is established on the basis of fixed cost and variable cost. Fixed cost is constant, it cannot change any changing in production, but variable cost can be changed, changing takes place with the changing in production. Pricing is a strategic challenge. Variable Cost plus Pricing method, selling price is set by adding by mark up total variable cost. This markup can contribute a part in profit (Hollensen, 2010).

Discussion

Pricing Strategies

Sales Manger and Marketing Manager should have to make the decision about pricing simultaneously. Both are important in set pricing, because Sales Manager has experience about how consumer behave about the product, when comes for buying and Marketing Manager has experience about market trends.

Executives can structure pricing challenges into one of four types: price setting, price discounting, price structure, and overall pricing strategy (Rao, 2009).

Pricing Setting

Price setting refers to the challenge of setting the right price in the first place. Different price-setting approaches can be used for different products, and the appropriate approach for a product will evolve as the market evolves. Each of the dominant approaches to price setting shares an orientation towards capturing profitable customers through a mutually beneficial value exchange (Rao, 2009).

Discounting Refers

Discounting refers to the inevitable challenge facing firms when customers call for a lower price. Not all products must be discounted, but most executives discover that discounting can enhance profits. Unfortunately, discounts can also destroy profits (Schindler, 2011).

Successful discounting enables the firm to price the same product for different customers according to their willingness to pay, as long as the price remains above the marginal cost to produce. Evaluating the willingness to pay of millions of customers requires the development of a new corporate capability. Proper monitoring techniques, decision processes, analytics, and incentives must be implemented to enhance the firm's discounting decisions(Rao, 2009).

Price Structure

Price structures refer to the strategic approach through which specific transactional prices are set. Unit pricing, two-part pricing, complementary pricing, versioning, bundling, subscriptions, and yield management are all different price structures. Each of these price structures can enhance the profitability of some markets, and each is inappropriate for ...