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Pricing Strategy - Research Paper Example

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PRICING STRATEGY Name University Course Instructor Date Introduction Pricing strategy is a crucial aspect in the general plan of a business because accurate 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…
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Download file to see previous pages 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 ...Download file to see next pagesRead More
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