Pricing may not be exciting, but it is one of the most important issues for marketers; it is crucial not only to the profit that is to be made, but also to the quantity of the products that will be sold. This chapter examines the different ways of pricing that are used, and offers some ideas on how to choose a pricing strategy.
Pricing goods and services is a critical job to maximize the profit of business organizations. Price is the one element of the marketing mix that generates revenue; the rest are costs. The selection of pricing objectives is determined by the decisions of business positioning. Many organizations need profit to satisfy the stake holders and allocate resources for product development. The other objectives of the pricing strategy for a growing company may be maximizing the revenue, maximizing the market share and achieving the quality leadership. Several factors influence management's decisions about how price will be used in marketing strategy. An important concern is estimating how buyers will respond to alternative prices for a product or service. The cost of producing and distributing a product sets lower boundaries on the pricing decision. Costs affect an organization’s ability to compete. The existing and potential competition in the market segments targeted by a company constrains the flexibility in selecting prices. Finally, legal and ethical constraints also create pressures on decision makers. Pricing plays a key role in the marketing strategy. Strategic choices about market targets, products, and distribution set guidelines for both price and promotion strategies. Product quality and features, type of distribution channel, end-users served, and the functions of intermediaries all help to establish a feasible price range.
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