Download Pricing Strategy

Pricing Strategy
Price is exchange value of a product.
Pricing is one among the four Ps in the marketing mix. Pricing is the sum fixed in exchange for any
goods or service. Firms price their products keeping in mind the market, competition and the market
share analysis. Market demand and competition are the two major components involved in the
fixation of price.
Factors affecting Pricing Decisions.
Internal Factors:
Markets have to consider the internal factors when setting the price. Internal factors are the factors
that can be controlled by the company and can be altered.
They are

Marketing Objectives: Marketer sets the marketing decisions based on the overall company
objective.
Price is influenced by the following company objectives:
•
Market Share:
Pricing decisions in respect of share is for new and existing products. For new
products the company sets low price in the beginning in order to gain market
share. In case of existing products they retain the market share.
•
Profit maximization:
Marketer set the price for the product in order to maximize the profit.
•
Market Share Leader:
They lower the price of the product in order to become a leader in the market
share.

Marketing Strategy:
Marketing mix considers price as one of the main marketing element. It will be effective only
when all the elements of the marketing mix work together effectively. Price should be fixed
considering the quality, competitors and market share.
Cost is the important determinant in setting price. Marketer set price only after considering
all the costs associated in manufacturing the product. Consumer normally pays for the
product at a price higher than its manufacturing costs. It covers both fixed and variable
costs.
Fixed Costs: These are the cost that is not affected by changes in the level of production.
Variable Costs: They are the cost that is directly related to the changes in the volume of
production and distribution of products.
External Factors:
They are the factors which cannot be controlled and altered by the organization.

Market Demand and Elasticity:
Marketer should determine the effects of the price over the demand in the market. Changes
in the price of the product responsive to the changes in the demand are called as Elasticity
of Demand. It may be elastic, inelastic and unit elastic.
Elastic Demand
Changes in the price of the product have larger proportionate changes in the demand.
Increase in price lowers the revenue.
Inelastic demand
Changes the price of the product have a smaller proportionate change in the demand.
Increase in the price raises total revenue
Unitary Demand
Changes in the price of the product have an equal change in the demand. There is no change
in the revenue.

Distribution Channels and Customer Expectation:
The channels through which the marketer delivers the product should be properly selected.
The channel members do expect something which they receive from the percentage of the
final selling of the product. Customer expectations should be met. They value the products
much more than price.

Competitors Cost and Price: Marketer should consider the competitors product price while
setting the price.

Government Regulation.
They set price ceilings while setting price. Marketer should also consider other local
regulations and tariffs while determining the price.