Pricing Strategy

Pricing strategy and planning is complex and fraught with uncertainties.

Company Objectives

As a starting point - lack of realism and precise defination, inconsistant.

Establishing perameters

Upper and lower limits of price within which he can manoevre

Determining Factors

• Internal Factors
  • Cost of the product. Should be aware of costs & variations. Use of value engineering helps.
  • Allocation of costs. via product and production line.
  • Contribution profit v gross profit - both are relevant.
  • Company image
  • Risk taking
• External Factors
  • Competition
    • Number of manufacturers in sector
    • Is there wide variation in price and does this reflect in market shares
    • Is sector fiercely competitive with low margins or if not is there some agreement on price
    • New product - high margin or low margin
  • Consumer attitudes
    • Degree of price elasticity
    • Strength of brand loyalty
  • Image
    • Company's image has a bearing on price expectations
  • Inflation
    • Has resulted in price being more and more the key element in buying decisions

Selection and use of a pricing strategy

• Must decide on overall product strategy - which to develop, maintain, let die.
• Select pricing stategy with above in mind.
• Ensure pricing strategy is not inconsistant with other key elements of mix eg advertising, salesforce.
• Must not be afraid to initiate price changes.
• Must not be paniked into responding to every competitive price change.
• Must be flexible and be prepared to experiment.

Pricing strategy demands comprehensive information feedback, speed, inelligent response and efficient monitoring and control.