Identify the key determinants for pricing policy decision making.
Identify the different methods available for pricing products and services.
Explore how pricing strategy fits in with other elements of the marketing mix.
Marketing is defined as:
The management process responsible for identifying, anticipating and satisfying customer requirements profitably.
The key words in the definition in relation to the Pricing Policy are:
The prices a company sets for its product and services must strike a balance between
gaining acceptance with the target customers and making a profit for the organisation .
The first thing which we must define, is what is meant by price. Price is defined as:
The amount in money for which something is offered for sale.
A Pricing Strategy is defined as:
A plan which determines the best (at the time of making) pricing decision.
The planning of prices, including the setting of discounts, in considering items such as the price of competitive products, manufacturing and distribution costs, the firms growth and profitability, customer wants, and the elasticity of demand.
When setting prices we must consider:
Whether to discount or not.
The price that the competition charges.
The cost of providing the product or service.
The companys market position e.g. is it a market leader.
The type and nature of demand e.g. if an increase or a decrease in price will effect amounts purchased.
The market segments we are seeking to attract.
It must be remembered, that price is a key element in the marketing mix because -
for a profit motivated company, it relates directly to the total revenue, and ultimately the profit of the business.
Profits = Total Revenues Total Costs Profits = (Prices x Quantities sold) Total Costs OR
The Key Determinants for Pricing Strategy
The key determinants of pricing decisions are:
Organisational and Marketing objectives
Other marketing mix variables
Legal and regulatory issues
Consideration of intermediaries (retailers, wholesalers)