# What is price?
Ans: - Price is the amount of money charged for a product or service. Again price is the some of all values that consumer exchanges for the benefits of having or using the product or service.
1. Fixed price: - Setting on price of a product for all buyers.
2. Dynamic price: - Charging different price of a product depending on customer and situations.
# Show the impotency of pricing.
Ans: - Impotency of pricing are –
1. Price is only one elements of marketing mix that generate revenue.
2. Price is the most flexible element of marketing mix.
3. Most of the companies can not handle pricing well.
a) Company are too quickly reduce price to get sells rather convincing buyer that their product are worth a higher price.
b) Pricing is too cost oriented rather than consumers value oriented.
# General pricing approaches. (Syllabus item)
Ans: - A company sets price by selecting a general pricing approach that includes one or more these three sets of factors. We will examined the following pricing approaches –
1) Cost - based approach: - Cost based are three kinds :
a) Cost plus – pricing: - The simplest method of pricing is cost plus – pricing adding a standard mark up to cost of the product.
b) Break – even analysis: - Setting price brake even on costs of making and marketing a product or setting price to make a target profit.
c) Target profit pricing: - Setting price to earn a target profit.
2) Buyer based approach: - Setting price on perception value rather than on the seller cost.
• Value price: - Offering just the right combination of quality and goods service at a fair price.
3) Competition based approach: - Setting price based on price those competitors’ charges for similar product. It has two way –
a) Going rate: - Company se price based on what competitors are charging.
b) Sealed bid: - Company set based on what they think competitors will charge.
# Factor affecting Pricing Decisions. (Syllabus item)
Ans: - A companies pricing decisions are affected by both internal company factors and external environmental factors.
Internal factors affecting pricing decisions
Many internal factors influence the companies pricing decisions including the firms marketing objectives, marketing mix strategy, costs, and organizational considerations.
1) Marketing objectives: - Pricing strategies is largely determined by the decision on market positioning. Company’s marketing strategy can be different such as survival, maximization current profit, product quality leadership, marketing share leadership and others.
2) Marketing mix strategy: - Price is the only one marketing mix tool that the companies are used to achieve it objects. Pricing decision are co – ordinate with product design and quality, distribution and promotion decision to form consists marketing program.
3) Costs: - Cost is the set of floor for the price that a company can charge. The three type of costs are: -
a) Total cost: - The some of fixed cost and variable cost for any gave level of production.
b) Fixed cost: - Which cost that do not vary with the production or sales level.
c) Variable cost: - Which cost varies directly with level of production.
4) Organizational consideration: - In small company price of a product are set by top level management rather than production or seals department.
In large company of a product typically handled by divisional or product line management. In industrial market sells people may be allowed to negotiate with customers about price ranges.
External factors affecting Pricing Decisions
External environment that affected a companies pricing decisions such as nature of market and demand competitors cost, price, and offers, others external factors.
1) Nature of market and demand: - A companies pricing decisions depend on nature of market and demand. There are four types of market –
a. Pure competition: - This market consists of many buyer & sellers and they trading in a uniform product.
b. Monopolistic competition: - This market consists of many buyers and sellers who trade over a range of price rather than a single market price
c. Oligopolistic competition: - The market consists of few sellers who are highly sensitive to each other pricing and marketing strategy.
d. Pure monopoly: - The market consists of one seller. The seller may be a government monopoly a private regulated monopoly or a private non- regulated monopoly.
2) Competitors’ costs, prices and offers: - Another external that affected companies pricing decisions is competitors cost, price, and possible, competitor’s reactions to the companies own pricing moves. If the company follows high price and high margin strategy it may competitors but a low price and low margin strategy that stop the competitor and drive out them to market.
3) Other external factors: - Other external factors that affecting company’s pricing decision like as -
a. Economic condition: - Economic recession, inflation and interest rate affect the pricing decision.
b. Reseller need: -A company should set price that ensure reseller fair profit and easy to sell.
c. Government action: - Government action is another external factor which affects a company pricing decision.
# Discuss about new product strategies.
Ans: - Pricing strategies change as the product process through its life cycle. The introductory stage is especially challenging companies bringing out a new product face the challenge of setting prices for the first time. They can choose between two brand strategies –
a) Market - skimming pricing: - Setting a high price for a new product to skim maximum revenues layer by layer form the segments willing to pay the high price the company makes fewer but more profitable sales.
b) Market – penetration pricing: - Setting a low price for a new product in order to attract a large number of buyers and a large market share.
# Product Mix Pricing Strategies. (Syllabus item)
Ans: - The strategy for setting a product’s price often has to be charged when the product is a part of product mix. Product mix pricing strategies are fiver types –
1) Product Line Pricing: - Setting price steps between product line items. In product line pricing management must decide on the price steps to set between various products in a line. The price steps should take into account cost different between the products in the line. Customer’s evaluation of their different features and competitors price.
2) Optional - Product Pricing: - Pricing optional and accessory product that sold a main product but main product price remain same.
3) Captive – Product Pricing: - Pricing product that must be used with main product. Setting a price for products that must be used along with a main product such as blades for a razor and film for a camera.
4) By – Product Pricing: - Pricing low value by produce to get rid with them. Setting a price for by products in other to make the main products price more competitive. Some company produce main product with by - product and set price for by – product.
5) Product Bundle Pricing: - Pricing bundles of product that sold together within redact price. Combining several products and offering the bundle at a reduced price. For example fast – food restaurants bundle a burger, fries, and soft drink at a combo price.
# Price adjustment strategies. (Syllabus item)
Ans: - Companies usually adjust their basic prices to account for various customers’ differences and changing situations. The six price adjustment strategies summarized as –
1) Discount & Allowance Pricing: - Reducing prices for reward customer’s responses that carry pay or proportioning product.
I. Discount: A straight reducing in price on product during a period of time. Four types of discount are:
a) Cash discount c) Quality discount
b) Trade discount d) Seasonal discount
II. Allowance: - Promotional money paid by manufacturer to retailers. Allowance are two type:
a) Trade in allowance b) Promotional allowance
2) Segmented Pricing: - Adjusting prices of allow for different in customer, location and product. Selling a product or service at two or more prices where the difference in price is not based on differences in costs.
3) Psychological Pricing: - Adjusting prices for psychological effect. A price approach that considers the psychology of prices and not simply the economics the price is used to say something about the product. Psychological prices three types –
a) Old pricing b) Customary pricing policy c) Prestige pricing policy
4) Promotional Pricing: - Temporarily reducing price for increase short run sales. Temporarily pricing product below the list price and sometimes even below cost to increase short run sales.
5) Geographical Pricing: - Adjusting prices to account for the geographic location of customers. Five types of geographical pricing are –
a) FOB - origin pricing: - A geographical pricing strategy in which goods are placed free on board a carrier; their customer pays the freight form the factory to the destination.
b) Uniform - delivered pricing: - A geographical pricing strategy in which the company charges the same price pulse freight to all customers; regardless of their location.
c) Zone pricing: - A geographical pricing strategy in which the company sets up two more zones. All customers within a zone pay the same total price, the more distant the zone, the higher the price.
d) Basing - point pricing: - A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.
e) Freight - absorption pricing: - A geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business.
6) International pricing: - Adjusting pricing for international market. To do business in international market company can charge different price for different countries. Price of a product depends on cost, consumer’s economical condition, competitive situations, law & regulations, and development of the wholesaling and retailing system.
# Discuss the key issues related to initiating & responding to price charges.
Ans: - When a firm considers initiating a price change it must consider customer & competitor reactions. There are different implications to initiating price cuts & initiating price increases.
a) Buyer reaction to price changes is influenced by the meaning customers see in the price change.
b) Competitors reactions flow from a set reaction policy or a fresh analysis of each situation.
There are also many factors to consider in responding to a competitors price changes. The company that faces a price change initiated by a competitor must try to understand the competitor’s intent as well as the likely duration & impact of the change. If a swift reaction is desirable the firm should preplanned its reactions to different possible price actions by competitors. When facing a competitors price change the company might sit tight, reduce its own price, raise perceived quality, improve quality and raise price, or launch a frighten brand.
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