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How Business Success Depends on the Pricing Strategy and Brand Equity - Research Paper Example

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The paper "How Business Success Depends on the Pricing Strategy and Brand Equity" outlines how to determine pricing strategy, what drives the strategy and how it influence product equity. A pricing strategy is a crucial strategic concern as it influences the positioning of products in the market…
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How Business Success Depends on the Pricing Strategy and Brand Equity
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? PRICING STRATEGY Introduction Pricing strategy is a crucial aspect in the general plan of a business becauseaccurate pricing of products and services is the main factor in establishing a successful business. Pricing is a crucial strategic concern as it influences positioning of products. Moreover, it influences other elements of marketing mix like features of products, decisions channels and brand promotion. The discussion will outline how to determine pricing strategy, what drives the strategy and how pricing strategy influence product equity Discussion While there is no chosen criterion of determining pricing strategy, some sequence steps are commonly used in new products pricing strategy. For instance, market strategy development, which entails market analysis, segmentation, positioning and targeting. Two, making market mix choices entails brand definition, distribution of the brands and brand promotion tactics. Three, demand carve estimation, which entails understanding how quantity required differs from the price. Four, pricing strategy can be determined by calculating the cost, which entails including the variable and fixed costs related with the goods, (Takano, Ishii & Muraki, 2041). The goods cost of a unit is set at a reduced coat that a company might charge and this indicates the margin profit at increased costs. Five, setting objectives of pricing such as maximization of profit, maximization of revenue or stabilization of prices is another way. These pricing strategy steps are interconnected and serve as starting point in pricing strategy creation. Product pricing should consider the legal and competitive condition that the business operates. In competitive perspective, the firm should consider its pricing impacts on the competitor’s decisions of pricing; for instance, setting low prices may threaten the price competition, which may not be in favor of any party, while setting high prices encourage increased competitor numbers who have interests in profit sharing. From a legal perspective, a company has no freedom to price its brands at its chose level, for instance, there are price limitations that restrict high product pricing too, (Taylor, & Prestoungrange, 2009). Similarly, low pricing may be seen as predatory or dumping pricing in international trade cases. Proving different prices of diverse clients may infringe laws against discrimination pricing and collusion with rivals to set prices at a consensual degree is illegal in various nations. What drives pricing strategy? Pricing choices affects the product demand in the market, the competitors pricing strategy, the company profitability and the purchasing decision of the customer like brand product. Determining products pricing may be difficult but yet very crucial for business. Whereas there is no standard way of pricing strategy determination there are various factors that drive ones decision to pricing strategy, MCB University Press, 2003). For instance, the cost, all the hidden costs of the products such as invoice, insurance and taxes drives the pricing strategy because the cost of production must be lower than the selling cost. Second, profit – for instance, the pricing strategy is driven by the amount of money the firm intents to make from above the production cost. The cost factor is another drive, for instance, to make a profit, a company must charge high prices on the products to offset their production cost and marketing costs of the products. The average unit cost must consider both fixed costs such as rent and variable costs such as raw materials cost that changes with production volume. Thirdly, market demand is another driver because demand is the indicator of how clients will purchase a good or a service at certain cost. While the reduced costs attract more customers, the price effect over a prolonged period depends on elasticity. The buyers’ sensitivity on a certain products increases its price. If a company’s products are in higher demand, the company charges higher prices to make more profit. Consequently, if the demand is low, the prices are low to achieve a competitive advantage. Fourthly, industrial standards – while it is difficult to know how the pricing strategy of other companies is so that you can set pricing rates in the market. The business strategy may drive the pricing because the strategy makes a great difference to how a company prices its products. For instance, two firms may have similar goods but diverse prices depending on the strategy. Similarly, what a company offers to its customers makes a great difference to the price tag, (Heizer & Render, 2014). The brand’s life cycle level– for instance, for new products the company may hike prices to benefit from the novelty appeal of the brand. As the brand matures and becomes more competitive, prices reduce, therefore, a reducing market share for uncompetitive and poorly performing brand often forces the company to reduce prices even more; however, prices are likely to stabilize with competition exit from the market. Promotion strategy determines the product pricing; for instance, price discounts are efficient means of attracting clients’ attention and driving demand. Customers tends to try new products if they get reduced price, therefore, a company may choose increased prices to strengthen increased quality reputation and help woe clients that sells an exceptionally, luxurious product. Pricing strategy effects on brand equity Pricing is crucial to brand equity as it gives it a sense of identity and meaning, for instance, a solid pricing strategy may have a positive impact on the product equity, whereas a poor strategy many have a negative impact. Diverse pricing strategies affect brand equity in diverse ways, for instance in discounted pricing, the impact of competition or discount strategy of pricing may create a second-rate image of product that cause negative effect on equity of a brand. For instance, Rynaire a European Airline, established new routes for small airports to reduce the landing costs that covers regions uncovered by traditional airlines, this drove away some clients, but obtained brand equity for the firm in target markets elsewhere, (Kapferer, J.-N., & Bastien, 2012). In daily low pricing-, the approach of sustainable and profitable differentiation of price has become a main strategy and created crucial brand equity, making the firm a reduced price, increased value retailer. Additionally, brands that get into developing markets with an increased percentage of low affluent clients have their product equity directly influenced by their brands affordability to the targeted market. Brand equity implies that value to the company transactions derived merely from the clients’ perception of the firm and worth of goods and services. Application of symbols like name, logo, firm’s slogan, and codes in promotional attempts aids in building brand quality, therefore, the strategy of pricing contributes to customers, perception. The value position of the firm is a combination of advantages it provides through its product solution to target consumers, (Taylor, & Prestoungrange, 2009). From consumers’ perspective, the value strategy is easier because they compare the product price and product’s quality perception relationships. Increased price negatively affects the value position whereas low prices lower the profit margin. A reduced cost strategy of pricing is restricted to reduce successful clients in a certain industry, therefore, in reality, only a single brand can provide the lowest price over a prolonged period. Practically, in competitive price market, many firms collapse and few low-cost providers experience brand equity benefit. Faith integration Religion plays a crucial role in equity pricing and effects of religion on the company’s equity capital cost is greater for companies without alternative mechanisms of monitoring as measured by reduced institutional ownership. This means that religion performs a corporate governance function. Similarly, the significance of religion to pricing strategy is stronger on companies that suffer reduced visibility, which is increased sensitive to local economic and social aspects; therefore, we can conclude that religion plays a crucial role in pricing strategy. Conclusion In conclusion, therefore, the success of a business exclusively depends on the pricing strategy and brand equity, therefore, a pricing strategy is a crucial strategic concern as it influences positioning of products in the market. References Heizer, J. H., & Render, B. (2014). Operations management: Sustainability and supply chain management. Boston: Prentice Hall. Kapferer, J.-N., & Bastien, V. (2012). The luxury strategy: Break the rules of marketing to build luxury brands. London: Kogan Page. MCB University Press. (2003). Pricing strategy & practice. Bradford, England: MCB University Press. Taylor, B., & Prestoungrange, G. (2009). Pricing strategy: Reconciling customer needs and company objectives. London: Staples P. Takano, Y., Ishii, N., & Muraki, M. (January 01, 2014). A sequential competitive bidding strategy considering inaccurate cost estimates. Omega, 42, 1, 132-140. Read More
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