Marketing distribution management - Essay Example

Pricing Strategies Cost-based pricing is a pricing strategy that uses production or manufacturing cost as a basis forsetting out the price of manufactured products. The company uses its cost to determine price floor and price ceiling. The strategy results at competitive prices and may attract consumers who are looking for inexpensive commodities. On the other hand, value-based pricing strategy determines the value of its products or services rather than the cost the company incurred in creating and producing it (Oxenfeldt 107).

The company utilizing this pricing strategy earns high profits from its operations. Conversely, some consumers may not be willing or afford to pay the high price and therefore may purchase from a competitor. Microsoft Company utilizes value-added pricing strategy to sell its product in the market. In this perspective, the company determines the value of window operating system in determining the value to place on the product in the software market. The company sells the product at a high price because the product provides special, unique and valuable features not available in the market (Schindler 51).

The strategy is the best for the company since it determines the cost of the product by what customers are willing to pay. On the other hand, the uniqueness and company’s brand name validate this pricing strategy. Traditionally, skimming and penetrating pricing approaches were used to determine the price of a new product in the market. Microsoft Company utilized the skimming pricing strategy in presenting the new window software in the market. The rationale behind this approach was to skim off the top of the market and therefore dominate (Schindler 96).

On the other hand, penetrating pricing strategy involves introducing a new or innovative product at a low price in an attempt to gain a share of the market.Works CitedOxenfeldt, Alfred R. Pricing Strategies. New York: Amacom, 2006. Print.Schindler, Robert. Pricing Strategies: A Marketing Approach. Thousand Oaks, Calif: Sage Publications, Inc, 2012. Print.