Pricing Strategy

Essay by popoyip March 2013

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Pricing is essential but complicated for marketer. An organisation can fail if there is any mistake in pricing strategy even if all other aspects of marketing strategy are achieved(David F.,2004). 'Price, product, promotion. The greatest of them is price. It is also the least talked about and the least understood.' (Winkler, 1990) It is unique in four P as it is the only one generating income instead of incurring costs. The essay aims to highlight the primary approaches to make pricing decision and the pricing of voice recognition device (VRD) of The Marketing Game. According to Kotler, price is 'the amount of money charged for a product or service'.

There are some primary determinants and pricing approaches to make pricing decision. They are cost-based pricing which is internal issue focusing on cost, demand-based pricing which is external issue focusing on price elasticity of demand and market-based pricing which is at the micro-level focusing on market structure.

Besides, pricing is also influenced by consumer behaviours which can be reduced to marketing man and economic man (Bagozzi).

First, cost-based pricing strategy can be used to determine price. This method emphasizes a company's production and marketing costs which are evaluated to set a price that generates satisfactory profit (Frances B. and Stephen P. 2006). The strategy can be classified into few variations like mark-up and cost-plus pricing.

For cost-plus pricing, the price is set based on the manufacturing cost plus a target profit margin. (Kotler, 2010). The risk is low because the firm can ensure the production and marketing cost can at least be covered by revenue.

For mark-up pricing, retailer sets the retail price to consumers by adding a percentage mark up on the price of the goods from supplier (Cannon, Hugh M;Morgan, Fred W, 1990).

Break-Even is also...