Pricing Analysis 1 VO - Essay Example

of Paper PRICING ANALYSIS Marketing is one of the major determinants of profitability and acceptability of the product by the customers. Here we will talk about price, how effective is a price increase/decrease in attracting customers? Amongst the 4 P’s, Price is the easiest variable to change. Price itself is made up of 3 key components; Cost, Customer and Competitor. It should be high enough so that it covers the cost with a percentage of mark-up, but not so high as to discourage the loyal and possibly potential customers (Lacobucci, 2009, 100).

Given the scenario of Hanabo Manufacturing, a 5% reduction in price would lead to a comparative increase in sales volume. Assuming:Customers are loyalProduct is a necessity Competitors would not react to this price cutHowever, the graph in the scenario shows an elastic demand which means that the product in question is a luxury and not a necessity. Hence, greater number of substitutes would result in greater competition. Therefore, rather than implementing a price cut which is an imperfect way to attract customers; the company can offer a discount (Lacobucci, 2009, 111).

The company should keep a discount offer of 5%, the proposed price reduction, for a limited time period and monitor its sales. If the sales are higher as expected during that particular period then it can proceed with the price reduction, and hence enhance its sales and market share. Works CitedLacobucci, D.L. (2009). MM. USA: South-Western College