Price and pricing strategy

When talking about the price, it is about tactical program corresponding to one of the elements of marketing mix. The question of price is not usually extracted in the marketing plan in a separate subsection, it merges with the plans for i.e. products.

Price, contrary to its appearances, is a difficult marketing tool. It can be changed easily, but one false step would deprive the company of profit or might lead to the collapse of the market strategy of the company. That is why it can be a dangerous weapon.

It is one of the factors determining the size of selling a particular product. Thus, it has an influence not only on income but also on demand. Prices are subject to changes under the influence of competition or with the product life-cycle.

Price reflects the strengths and weaknesses of the product, its value as it is seen by the customer and the position among the competitive products. Certain marketing programs are related to its fixing- they are as follows (Nowotny 1993: 70):

  • retail pricing,
  • wholesale pricing,
  • deductions,
  • discount,
  • allowances,
  • payment deadline,
  • credit terms.

In order to properly fix the price, which should not be too low or too high, you should obtain numerous information associated with who the customers are. They can be acquired in many ways: survey company’s customers, discuss it with experts, analyze market trends. If you want to sell a product as a high quality luxury, it would be a mistake to set for it a price that is too low.

Quite a good tool that could help in fixing the right price is the survey, carried out among customers. The questions should be asked in such a way as to allow to specify customers flexibility in terms of price. They can also be asked to evaluate many of the features of the product from which one is the price.

An important factor in determining the prices are the borne costs. Many companies are shaping their prices at the level of “cost plus”. But this is not a method that will take into account how much the customer is ready pay, or how much the company must spend to stay on the market.

One of the ways of increasing the price is to transfer the risk associated with the use of the product by the client at the company itself, for example ,you can promise him that if he is unhappy or bears some damage because of his purchase, he will be given his money back, etc. This is a risky way and you should be careful while estimating its profitability, but still it may happen that the price you get will prove profitable.

It is often said about the two pricing strategies that can be adopted when the product has an advantage over its competitors. These are:

  • “collecting cream” strategy (skimming strategy) – when the product enters the market it has a high price at the beginning, which is then being reduced. Reimbursement of costs associated with a new technology product is achieved in the first phase. With this strategy, the manufacturer is able to determine the price and specify the height of his profits. However, there must be a strong need which that product is able to satisfy, and the product itself should be original and difficult to imitate by the competition. The price is- cost plus profit;
  • penetration strategy – you set a low price in order to attain quickly a high market share, strong and on a large scale sale, and all that thanks to the reduction of production costs. Manufacturer intends to reach the top of the planned market share, by accepting a price that it dictates. Profit will be achieved only if the product can be produced at cost that is below the price. It is the right strategy, if there is a probability that competitors will enter the market quickly and you think that with high sales you can save much on costs of marketing and production. Here, we have to do with the shift of the focus as compared to the previous strategy, i.e. profit is the price minus costs.

While setting the price, all the elements of the marketing mix should be taken into account, because the price not only affects them, but it is also determined by them. The price may be affected by: marketing objectives of the company, consumers, competition, regulatory restrictions, the prestige of the company and product, market situation, costs.


Ten post dostępny jest także w języku: Polish

Pin It