This lesson on marketing strategy introduces the concept of pricing, which is one of the fundamental ps of a companys marketing mix. Pricing as an element of the marketing mix 5 pricing, on the other hand, is not primarily concerned with creating value. Each product within the structure forms a part of the product mix. Byproduct pricing refers to setting a price for byproducts to make the main products price more competitive. Implies a pathway through which the final products of manufacturers reach the end users. Pricing decisions 120 if buyers focus only on a products selling price per purchase unit without considering reputation, they may end up purchasing from vendors that provide neither quality nor value. In the marketing mix, price has its own place which determines a customers payment to acquire a product. Factors affecting pricing decisions business study notes. These include geographical pricing, price discounts and allowances, promotional pricing strategies, discriminatory pricing and product mix pricing. Therefore, the pricing decisions of an organization have a direct impact on its success. Rather, it could be said to be the marketing activity involved with capturing, or harvesting, the value created by the other types of marketing activities. Dec 26, 2017 pricing strategies and pricing decisions are one of the most difficult decisions faced by a marketer. Feb 25, 2016 an introduction to the subject of pricing strategy and an overview of some of the tools and theories available in connection with the determining of price of a product or a service. Marketing management pricing decision tutorialspoint.
Marketing mix decision involves preparing marketing mix strategies for international market. It is the result of the fact that producing products and services often generates byproducts. Pricing strategy helps to increase a companys product or service sales in selected market. Marketing theory states clearly that price is one of the 5 p s product, positioning, place, promotion and price that contributes to the marketing mix in order to get potential customers attention, motivate them, and get them to buy products or services. Pdf price is a major parameter that affects company revenue significantly. Need to decide what position you want your product to be in. Purchase unit pu refers to the weight, volume, or container size in which a food is normally purchased.
The competitors also keep an eye on the price levels of a company. Thus, these are the major factors that influence the pricing decisions. International marketing decision your article library. Nothing can cause confusion and doubt in a business like pricing your products and services. Pricing depends on various factors like manufacturing cost, raw material. Pricing can be defined as a process of determining the value that is received by an organization in exchange of its products or services. An introduction to the subject of pricing strategy and an overview of some of the tools and theories available in connection with the determining of price of a product. Understand the factors that affect a firms pricing decisions. For international markets, pricing is one of the most important elements of marketing product mix, generates cash and determines a companys survival yaprak, 2001. A product line refers to a unique product category or product brand a company offers. Introduction we need to set price when we have a new product, or when we enter a new market with an existing product how.
It includes decisions related to product development, product pricing, product distribution and product promotion. Obviously, cost needs to be one of your first considerations when making pricing decisions. Pricing decision analysis the setting of a price for a product is one of the most important decisions and certainly one of the more complex. Pricing strategy is beneficial in terms of diverse purchasing behavior of various customers. Price is a major parameter that affects company revenue significantly. However, the product line is a subset of the product mix. Using product bundle pricing, companies combine several products and offer the bundle at a reduced price. Pricing strategies, pricing strategy, what are strategies for. Costplus pricingsimply calculating your costs and adding a markup. Before turning to the product mix decisions, we first have to know what the product mix actually is.
This can be a minor part of the product or a major part of the total offering. A firm also has to look at a myriad of other factors before setting its prices. The overall product mix offering tends to be quite a strategic one as it pushes or restricts the brandfirm into competing in different parts of the marketplace. A fairly limited range of a product mix means that the brand is often more of a niche player. Product decisions or policy and strategy are concerned with the management of the products product portfolio and brand management. What should you consider when making pricing decisions. The product mix, also called product portfolio, is the set of all product lines and items that a company offers for sale. Decisions on a productmix level product decisions at the productmix level tend to determine the width of a companys productmix. When the product is a part of product mix or portfolio, companies adopt five kinds of pricing strategies in marketing which are as under product line pricing this strategy is used for setting the price for entire product line. Product support services stage five of individual product decisions. Companies use many different pricing strategies and price adjustments.
Factors that affect pricing strategies for international. Pricing a product is one of the most important aspects of your marketing strategy. Aug 04, 2015 before going into the detail of factors affecting pricing decisions, lets discuss some of the basic concepts of pricing, which are also important to know. What are the factors influencing pricing decisions in a market. Simply defined, price is the amount of money charged for a product or service. Product mix pricing strategies pricing the product mix. Optional product pricing involves setting prices for accessories or options sold with the main product. Product definition a product service is the most important component of the marketing mix being the centre of focus as the offer to the market. Finally, the marketing plan is executed and the outputs of marketing efforts are monitored to adjust the marketing mix according to the market changes. However, the price must generate enough revenues to cover costs in order for the product to be profitable. Decisions regarding the product, price, promotion and distribution channels are decisions on the elements of the marketing mix. A change in price not only directly affects revenue but has major consequences on other decisions.
Costplus pricing, oddeven pricing, prestige pricing, price bundling, sealed bid pricing, goingrate pricing, and captive pricing are just a few of the strategies used. Keep the following things in mind when you work with your controller services to set your own pricing strategy. Apr 08, 2020 a product mix is a group of everything a company sells. Usually, the companys offer includes some form of customer service, of product support services. Some of the major factors influencing pricing decisions of a company are as follows. A customer always compares the companys prices with those of its competitors. Dec 11, 2017 the importance of pricing the price a business charges for its product or service is one of the most important business decision that management makes. Thus, when we have to decide the product mix pricing, we have to decide the effect on the overall pricing and the ripple it will create on multiple product lines. Marketing mix decisions remain same as domestic market except the target market. Product mix pricing strategies in marketing study lecture notes.
Pricing strategy is a science that requires you to consider many factors if you want to maximize your profits. Understand why companies must conduct research before setting prices in international markets. The 5 product mix pricing strategies or situations are depicted in the table below. The money claimed against the offered product or service in the market is called price. When a product is part of a product mix, the strategy for setting a products price often has to be changed. Generally, pricing strategies include the following five strategies.
In such situations, firms are on a lookout for prices that would maximize the total profits of the product mix as such. The last one of the product mix pricing strategies is product bundle pricing. The consistency of a product mix refers to how closely related are the companys product lines in terms of characteristics, production process, distribution channels to name just a few. It can be argued that product decisions are probably the most crucial as the product is the very epitome of marketing planning. Pricing strategy has played an important role in consumer purchasing behavior and decision making process richard, 1985. This is why this paper starts by presenting basic pricing concepts. In essence, multiple product lines forms the complete product mix. If the distribution channel is large, price of the product will be high and if the distribution channel is short, the price of the product will be low. Marketing management pricing decision pricing is a process to determine what manufactures receive in exchange of the product. Jul 03, 2017 this lesson on marketing strategy introduces the concept of pricing, which is one of the fundamental ps of a companys marketing mix. Individual product decisions also include product support services.
Secondly, high degree of demand and uncertainty create more revenue. Five factors to consider when pricing products or services. It acts as a crucial element of generating revenue for an organization. A companys price level sends signals about the quality of its products to the customer. Product mix decisions width, length, depth and consistency. Marketing mix consists of 4ps product decisions, pricing decisions, promotion decisions, and place or distribution decisions. Pricing decisions factors to consider when setting prices all profit organizations and many non profit organizations must set prices on their products or services. Yield management is especia lly suitable in the case of time. For example, patanjali deals in different categories of products which include shampoo, flour, toothpaste, etc. Product mix pricing strategies in marketing pricing is an important part of a companys marketing mix strategies. In other words the value exchanged for use of the benefits of a certain product or service by the. Product life cycle a basic pricing decision is to choose between a one price policy and a flexible price policy. For example, the new system will result in more accurate product costs which will influence pricing and product mix decisions.
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