Price setting in different business establishments today varies
according to the marketing approach of the product offered. The modern marketing considers the pricing strategy
as the ultimate stage of whether the customer will gave in from the offered
price of the company. From the
viewpoints of Kotler & Keller, Setting the Price has 6 steps procedure to
consider
1. Selecting the price objective: in setting the price a
company must set its objective as to the survival of the product, Maximum
current profit, maximum market share, maximum market skimming, product-quality
leadership, & other necessary objectives like partial and full cost
recovery.
2. Determining demand: requires the participation of the
customer and the assistance of the supplier. Level of demands varies from
different product characteristics of the company. Some general concepts of
market demands are from price sensitivity, estimating demand curves, and price
elasticity of demand.
3. Estimating cost: cost minimization is the key to the
overall profitability of the firm. Calculating the fixed cost or overhead,
variable cost, total costs, and average cost will give the firms guidance towards
the activity-based cost of the firm. Accumulated production on the other hand
relates to the experience curve or the learning curve of the manpower of the
organization. Consequently, target costing is a relevant process of estimating
the cost of the organization using the academic knowledge from the different
faculties like designers, engineers, and purchasing agents.
4. Analyzing Competitors’ Costs, Prices, and Offers: refers
to the analysis and studies of the organization’s competitors. By looking to
your competitors cost, price, and offerings as a marketing agent point of view
you can determine the marketing power of your product and your company towards
the market and other competitors and ultimately know your market share.
5. Selecting a Pricing Method: It doesn’t mean that all
products has the same pricing method.
Before you put the prices to the market you need to consider different
techniques and theories of pricing. The
common given methods are markup pricing, target-return pricing, perceived-value
pricing, value pricing, going-rate pricing, and auction-type pricing.
6. Selecting the final price: the vital step in pricing is
the time when the marketing team will decide the final price for the product or
products of the company. This final
process requires concerns in terms of impact of other marketing activities,
company pricing policies, gain-and-risk-sharing pricing, and impact of price on
other parties.
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