PRICING STRATEGIES

Pricing Strategies



Pricing Strategies

Introduction

Price is the one of element of the marketing mix that produces revenue; other element produce cost. Pricing is a critical element in any marketing plan of a company, because it directly affects revenue and profit goal. According to Joseph (2005), pricing is the most flexible element of marketing strategy in that pricing decisions can be implemented relatively quickly in comparison with the other elements of marketing strategy. As we know pricing play a vital role in the organization profit margin because pricing is the only source of revenue for all organizations, thus pricing is the most sensitive approach. To achieve superior, sustainable profitability, pricing must become an integral part of strategy, not merely an afterthought.

Steps in calculating price of a product

1) Selection of the objectives of the price

2) Identification of Market

3) Estimated demand

4) Estimation and Compression Costs

5) Analysis of costs, prices, and competitors

6) Selecting a method for pricing

Demand-based methods

Methods based on costs

7) Selecting the final price (Ying 2006)

Analysis of fresh-food market in USA

The fresh food market of USA has gone through a number of significant changes in the past few years because of an increase in demand and increase, in number of competitors in the market. Due to changes in demands of customers in USA, changes in different technologies in marketing and production, and integration of different retail activities, there has been a change in the orthodox market association between a manufacturer, an intermediary, and a retailer. Nowadays, people in USA have started consuming fresh food at a greater pace as compared to previous days, and have started to demand more ease in their experiences, like pocketed salads.

The restaurant industry in the United States now equals or exceeds U.S. household spending on food in retail stores. There is no statement or market research indicates the sales of organic fruits and vegetables to the catering sector. Inquiries from distributors of organic fresh fruits and vegetables in the United States indicate that the same distributors that supply the service areas of natural-food and conventional food distributing fresh produce to organic, food sector (Haughton and Fitzhugh 2005).

Competitive analysis of USA fresh food market

Parameter

Attractiveness

Remarks

 

1

2

3

4

5

 

Availability ofclose substitutes

 

 

v

 

 

Substitutes are available but at a high cost in the form of canned-food

Switching Costs

 

v

 

 

 

Switching costs are bit high because canned-food charge higher prices

Price and value of substitute product

 

v

 

 

 

The value of substitute product is very high because they are providing quality packed food

No. ofCompetitors

v

 

 

 

 

There are a number of fresh markets in the country; therefore, competition is very high. Customers usually look for low cost products

Growth of the industry

 v

 

 

 

The growth of the industry has been halted to some extent

Differentiation

 

 

v

 

 

No such differentiation required

The competitive analysis of fresh-food market of USA has shown that there is a lot of competition in the USA fresh food market, and there are a number of competitors in the industry of fresh food in USA. The below chart has shown that the average consumption of fresh by Americans have shown a downward trend in past few years, which shows that the growth ...