Pricing Stratagies

Essay by kingpin007University, Master'sB, May 2004

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Pricing Strategies

In today's world of cutthroat competition among companies, pricing is very important. It is one of the major factors that decide the profitability and overall existence of the company. As one of the four p's pricing strategically is important to the company. As price is affecting both the number of sales an organization makes and how much money it earns, right pricing is one of the key factors of success for a product as well as the company which manufactures the product.

Peter Rix defines pricing as" the value expressed in money terms" (Rix Peter, Marketing a practical approach, 2004, P293). The company earns all its revenue from the price it charges for its products and services. If the price is very high, it will affect the number of units they sell and if the price is too low it will affect the profitability of the company. In a monopolistic market a company can charge whatever it like.

Pricing strategy and prices are more sensitive when the competition is high. . The importance of pricing is not applicable if a company has monopoly or there is nil or less competition.

The main objectives for price strategy planning can be divide between profit-oriented objectives, sales-oriented objectives and status quo pricing objectives. In profit-oriented objectives, the focuses are on getting a specific return from selling a specific number of units or profit maximization. In sales-oriented price objectives the main focuses are on the growth of sales of a product or to grab a desirable market share. In status quo pricing objectives focuses on maintaining the current stage in sales as well as market share.

According to Zikmunt and d'Amico, pricing strategies may be categorized under five headings.

1. Differential pricing strategies

2. Competitive pricing strategies

3. Product-line pricing strategies...