Operations-oriented pricing: where the objective is to optimize productive capacity, to achieve operational efficiencies or to match supply and demand through varying prices. īroadly, there are six approaches to pricing strategy mentioned in the marketing literature: The pricing strategy established the overall, long-term goals of the pricing function, without specifying an actual price-point. While the actual price of goods or services may vary in response to different conditions, the broad approach to pricing (i.e., the pricing strategy) remains a constant for the planning outlook period which is typically 3–5 years, but in some industries may be a longer period of 7–10 years. The strategy is designed to provide broad guidance for price-setters and ensures that the pricing strategy is consistent with other elements of the marketing plan. This pricing strategy typically becomes part of the company's overall long-term strategic plan. Marketers develop an overall pricing strategy that is consistent with the organization's mission and values. A good pricing strategy would be the one that could balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price by which the organization experiences a no-demand situation). In economic terms, it is a price that shifts most of the consumer economic surplus to the producer. Price can act as a substitute for product quality, effective promotions, or an energetic selling effort by distributors in certain markets.įrom the marketer's point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. Where manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns, then prices are likely to be higher. Price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product. the consistency of prices across categories and products (consistency indicates reliability and supports customer confidence and customer satisfaction).the extent to which the price supports a product's market positioning and be consistent with the other variables in the marketing mix.the fit with marketplace realities (will customers buy at that price?).the financial goals of the company (i.e.The objectives of pricing should consider: Thus, pricing is the most important concept in the field of marketing, it is used as a tactical decision in response to changing competitive, market and organizational situations. The needs of the consumer can be converted into demand only if the consumer has the willingness and capacity to buy the product. An automated pricing system requires more setup and maintenance but may prevent pricing errors. Pricing can be a manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. However, the other Ps of marketing will contribute to decreasing price elasticity and so enable price increases to drive greater revenue and profits. Price is the only revenue generating element amongst the four Ps, the rest being cost centers. Pricing is a fundamental aspect of product management and is one of the four Ps of the marketing mix, the other three aspects being product, promotion, and place. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of product. Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. A price tag is a highly visual and objective guide to value
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