The Methods of Setting Prices - Essay Example

?  Pricing Decisions Article is based on the study of pricing practices and policies by small business owners/managers in northeast Louisiana. Article 2 relates to examination of the success of pricing practices of a new product and the conditions upon which contingency of success lies. Article 3 focuses on defining pricing strategies for specific corporate objectives. Article 4 aims at studying both usage-based and fixed pricing schemes in a competitive scenario where the company is incurring a transaction cost of monitoring usage on the implementation of usage-based pricing. Article 5 aims to find out the methods of setting prices which are dominating Slovenian business practice. Introduction The articles deal with the pricing practices and strategies in various businesses. As stated in article 1, the businesses and consumers have perfect knowledge of the marketplace but actually they lack the perfect knowledge. This makes the establishment of a pricing policy necessary. Article 2 is based on examining pricing for new product price decisions. It is basically the study of the three pricing practices with respect to competition, costs, and customer value. Article 3 states that products have been divided into four categories such as specialty, preference, convenience, and shopping. The research in this article is basically on the pricing strategy for the various product categories. The relevant strategy was selected as per the literature of the paper that is penetration and skimming strategy. Article 4 deals with the pricing of a short license for software service. Earlier, firms in this industry used to do the pricing based on the usage of resources. As computer hardware became fast and cheap the business model remained no more significant. With the recent spread of complex enterprise software, the cost of software maintenance and deployment has increased again. Therefore, the pricing scheme had been termed as subscription pricing. Article 5 states that pricing is not the most important but is just one of the elements of marketing mix. Inspite, managers complain quite often about the problems and pressures arising due to pricing of competitors, it is stated in the article that pricing is rarely a problem. It states that pricing should be such that the perceived value of the product or service should supersede the perceived price. Importance of the study Article 1 focuses on determining whether small firms use the same established economic principles that economists rely on while explaining the behavior of large firms with regards to pricing strategies and objectives. The study basically is conducted in order to determine whether the economic principles are appropriate for small businesses or not. Article 2 is significant because it deals with the aspects of new product pricing practices. The research paper assesses the ways pricing can be done for a new product. It is important from the perspective of a manager as its becoming difficult for managers to analyze the correct price for the value they are providing to their consumers. Article 3 deals with the aspects of pricing of various product categories which could help attain the corporate objectives of the firm. It is important because pricing should be done on the use of the product. The product category such as convenience products cannot be priced higher as because of the presence of many low cost producer firms in the industry. The research is ideal for serving as a starting point for a developing a framework of corporate objectives, pricing strategies, and product categories. Article 4 is important because it is related to software pricing. The pricing strategy the researchers are focusing on is basically usage-based pricing wherein the firms will be able to acquire low usage consumers as they do not have to pay more than they use. Article 5 is important as the research is on pricing based on cost or customer. Literature Review Paper 1 In the year 2011, Dunn et.al conducted a study on “Pricing practices in very small businesses”. The aim of the study is to ascertain whether small firms use established economic principles that economists rely on while explaining the behavior of large firms regarding pricing strategies and objectives. The methodology used is primary research through circulation of questionnaires. The conclusion could be drawn that very small businesses generally follow the basic principles of economic theory in northeastern Louisiana (Dunn et.al, 2011). Paper 2 In the year 2003, Ingenbleek et.al conducted a study on “Successful new product pricing practices: a contingency approach”. The aim of the study is to examine the success of pricing practices of new product and the conditions on the contingency of success. The methodology used is primary research by mailing to 590 marketing managers. The conclusion drawn from the study is that value-informed pricing leads to new product performance whereas cost-informed and competition-informed pricing have no vital effect (Ingenbleek et.al, 2003). Paper 3 In the year 2009, Kehagias et.al conducted a study on “Plaiting pricing into product categories and corporate objectives”. The aim of the study is to define pricing strategies for specific corporate objectives. The methodology used is primary research. The primary research was based on pilot/exploratory interviews. The conclusion drawn from the above study is that the frequency of use of pricing strategies differs along corporate objectives and product categories in few cases. The high-price strategy prevails in case of specialty products whereas the low-price strategy is used for preference and convenience products. When main corporate objectives are to increase market share the low-price strategy is used more often and vice-versa (Kehagias et.al, 2009). Paper 4 In the year 2010, Bala et.al conducted a study on “Usage-based pricing of software services under competition”. The aim of the study is to determine the transaction cost incurred by the firm in implementing usage-based pricing under competitive setting. The conclusion drawn from the findings is that the ‘usage-based pricing’ may not be a panacea for software service providers (Bala and Carr, 2010). Paper 5 In the year 2004, Korda et.al conducted a study on “Cost-driven or customer-driven pricing”. The aim of the study is to ascertain the methods of setting prices. The methodology used is primary research. The conclusion drawn from the study is that cost-driven is more commonly used than customer-driven pricing. Summary After studying Article 1 it was found that is based on the study of pricing practices and policies by small business owners/managers in northeast Louisiana. In a nutshell it may be said that on the basis of Article 1, the businesses and consumers have perfect knowledge of the marketplace but actually they lack the perfect knowledge. This makes the establishment of a pricing policy necessary. Article 2 relates to examination of the success of pricing practices of a new product and the conditions upon which contingency of success lies. Hence, it is based on examining pricing for new product price decisions. It is basically the study of the three pricing practices with respect to competition, costs, and customer value. Article 3 focuses on defining pricing strategies for specific corporate objectives. The methodology used in this article is primary research. The primary research was based on pilot/exploratory interviews. The basic findings of the study suggest that the high-price strategy prevails in case of specialty products whereas the low-price strategy is used for preference and convenience products. The aim of the study of Article 4 is to determine the transaction cost incurred by the firm by implementing usage-based pricing under competitive setting. It used both usage-based and fixed pricing schemes in a competitive scenario where the company is incurring a transaction cost of monitoring usage on the implementation of usage-based pricing. The aim of the study of Article 5 is to ascertain the methods of setting prices which was primarily done with the help of primary research. The conclusion drawn from the study is that cost-driven is more commonly used than customer-driven pricing. Article 5 is important as the research is on pricing based on cost or customer. Reference Korda, P and Sabina, B. (2004). Cost-driven or customer-driven. Zagreb: University of Zagreb. Bala, R and Scott, C. (2010). Usage-based pricing of software services under competition. Kehagias, J and et.al. (2009). Plaiting pricing into product categories and corporate objectives. Ingenbleek, P and et.al. (2003). Successful new product pricing practices: a contingency approach. Dunn, P and et.al. (2011). Pricing practices in very small businesses. Read More