Question

Well-developed answer. Subject Marketing.

A. Describe the procedure for setting the right price.

B. Explain how discounts, geographic pricing, and other pricing tactics can be used to fine-tune the base price.

C. Describe the role of pricing during periods of inflation and recession.

Answer 1

A) In the present competitive world pricing strategy or policy is the most difficult takes every company has to fulfill. Price is the only element of marketing mix which generate revenue where S other elements create expenses or produce costs. After developing the new product the next critical stage is to set the price for the first time..the price set must have relation with value delivered by the product and value perceived by the customers. Setting the pricing objective to find survival,maximum current profits, maximum market share,maximum market skimming and product quality leadership. On the basis of customer demands costs and competitors prices company has to select suitable price before its product.

B) while setting the price company do not set single price but sets a pricing structure . This pricing structure is designed in such a way that it will take care of variation in geographical demand and costs ,market segment requirements , guarantee,delivery time,and frequency. This is price adaptation or price modification strategies..

Geographicall pricing strategy: company decide how to price it's product to different customer staying in different locality,area or country.

Price discount and allowance strategy: company adjust its list price and give discount and allowance to attract customers. Discount is given in the form of cash discount,quantity discount , trade discount etc

Promotional pricing : the technique to stimulate early purchase this is done in the form of special event pricing,cash rebates longer payment terms warrantee and service contract.

Discrimatory pricing: company adjust its basic price to accommodate different customers, products, locations etc

Product mix pricing: this strategy is used by the companies where the individual product is part of the product mix. Here set of price is selected which will give maximum profit on total product mix.

C) when company observes that its market share is dropping to maintain existing market share company may decide to cut the prices.it is very risky to decide the price cutting strategy. Once company reduce the prices there is every possibility of triggering price war.price cut policy can increase company market share but it can also loose loyal customer. However during the period of economic recession considering overall market situation company may have to take price cut decision.

When company decide to successful price increase results into considerable raise in profits. Cost inflation is the main cause of price increase. When raising costs do not match with productivity gain it reduces company 's profit margin and company has to take decisions for increasing price.