CHAPTER 8 PRICING STRATEGY................

Objectives
At the end of the chapter, the learners
are able to:
1. Support pricing, its perspective,
importance, and objectives;
2. Critique how a price is set up for a
product and service;
3. Illustrate pricing strategies; and
4. Decide on price adjustments.

When a product or service is exchanged for money, said amount is know as price.
For instance, when someone bought clothing apparel, the costs of money paid to
the seller of the clothing itern is price. Same thing when a computer specialist
rendered service of fixing a computer, the fee paid by the customers considered
price.
Good pricing strategy helps find out the price point at which a business can
maximize profits on sales of its products or services. When setting prices, a
company owner requires thinking extensive options of factors such as production
and distribution expenses, competitor offerings, positioning strategies and its
target customer base.

Price is the worth that is assigned to a product or service which a consumer
must pay in order to receive it. It is the outcome of a difficult set of calculations,
doing research and understanding the market and risk-taking ability.
Normally, any customer will not buy a product or service that is priced very
high. However, any company would not also succeed if its product or service is
priced too cheaply. The set price ought to cover all of the company's expenses. In
both small and big businesses, price has an intense effect together with product,
place and promotion.
A pricing strategy takes into consideration segments, capacity to pay, market
situations, competitor act, trade margins and input costs, amongst others. The
strategy is targeted at the definite customers and in opposition to competitors.
Among the 4P's, price is the easiest marketing variable to vary and also the
easiest to copy. While setting up the price of a product or service the following

Considerations have to be remembered:
1. Nature of the product/service
2. The price of comparable product/service in the market
3. Target audience or for whom the product is manufactured such as
high,
medium or lower class
4. The expenditure of production such as labor cost, raw material
cost, machinery
cost, inventory cost, transit cost, etc.
5. External factors such as economy, government policies, legal
issues, and so on

Different Perspectives on Price

In terms of the marketing mix, , some would argue that
pricing is the least eye-catching element. Marketing
companies should in reality center their attention on
producing the highest possible margin. The case is that the
marketer should chah product, place or promotion in some
way prior to resorting to pricing reductione
However price is a flexible element of the mix. There are
several perception of price differs founded on the viewpoint
from which it is being viewed.

The customer is the one who seeks satisfaction for a need or set of needs by
buying a certain product or a set of products. Said customer can either be the end.
user or a business that buys raw materials or components of the tinal product.
Thus, the customer utilizes some measures to know how much to pay as the price
for the product received or the service rendered to satisfy his needs. Preferably
the customer is willing to pay only on a limited amount as possible.
In order to increase value, a business may either raise the perceived benefits or
lessen the perceived costs of a product. Perceived benefits and perceived costs are
regarded as elements of price. Perceived benefits are of three levels which consist
of physical, logical, and emotional. For instance, purchasing a new trouser suit
will help one stay warm (physical), land the new job for which he is for interview
(dogical), and save him from the humiliation of walking around undressed
(emotional). Increasing perceived benefits would produce value-added to the
product or service. Perceived costs, on the other hand, include money, time, and
labor. It may also comprise inconvenience, limited choice, and poor service.
It is very helpful to look at price from the standpoint of customers because
it provides help to identify value which could be the source for producing core
advantage.

The monetary system of each society offers a more opportune way to buy
goods and services and build up wealth. Price is used by society. to control its
economichealth. Price could be all-encompassing or restricted. For some
countries, products such as food, health care, housing, and automobiles are
priced highly that only selected few may afford to buy. However, for other
societies, health care is less pricey that it is made affordable and available to
everyone.
Price plays two different roles in a society which are being a rational man and
irrational man. Being a rational man, it is assumed under economic theory
that the consequences of price manipulation are predictable. While being an
irrational man, price accepts man's response to be at times changeable and
pretesting price manipulation is an indispensable job.

Price is the appraisal of the value that
customers perceived in a product or service
for which they are willing to pay. Thus, price
is very important to
businesses. While product, place and
promotion are essentially attention-getter,
pricing seemed to be a tough decision
especially for management.

Here is why price is very important:
1. Profit Margins - The price set for a product or service affects the profit margin per unit sold.
Selling with higher prices gives a higher profit per
item. However, higher prices may result to lower sales volumes which can reduce, or eliminate,
profits because the overhead costs per unit amplify as the consequence of selling fewer units.
2. Sales Volumes - One of the most noticeable effects of pricing in business is
an increase or decrease in sales volume. Price elasticity is always studied by
economists. Price elasticity is the reaction of consumer buying to a price change.
Increasing prices might lower sales volume only to some extent, helping make
up for reduced volume with higher total profits caused by higher margins.
On the contrary, lowering prices can increase profits if the sales makes a leap
extensively, cutting overhead expense per unit. It is better to test the market' s
response to price increases by means of changing prices in targeted areas
before setting-up a comprehensive price increase.

3. Position - For 'some consumers, price reflects things about the business,
the products and service which create the perceived value. Said perceived
value may influence the brand, reputation and/or position of the product/
service in the market. Say for example, a premium-priced product connotes
higher quality for some consumers. For other consumers, economically
priced products and services mean there is still quality but the price is made
affordable. Sales discounts, rebates and closeouts give the message that the
product and services are not sold on regular price or conveys the information
that consumers have limited chance to obtain a bargain.
4. Market Share - The price set for a product or service makes it relatively
competitive in the marketplace, which affects the share of themarketť's quantity.
A number of businesses lower their prices provisionally to steal market share
from competitors, who cannot countera price decrease. Once consumers tried
the product and develop loyalty to it, then price could again be increased in
the amount that is appropriate to maintain such brand preference.

5. Loss Leaders - Various businesses set price for their products or
services at or less than cost to obtain customers into their businesses.
For example, some restaurants offer low-margin specials to their
regular diners to continue their normal business operation or to allow
loyal diners bring along friends who fancy expensive dishes at a
reasonably priced canteen.

All companies function with the final objective of producing profs
Therefore, the price of a product must be sei bearing in mind the
cost acquired
In its production together with the benefits it provides for which
consumers a
prepared to pay some additional.
The objective sets the direction fo which path the business will go.

Here are the pricing objectives:
1. Surrtial-The primary pricing objective of any company is to price its product
or service to the most advantageous in order to survivé the competition
Extreme competition, a saturated market or alteration in customer's tastes and
preferences are some risks that may be confronted by any company which can
cause becoming out of the market. A company may set its price just to cover
the fixed and variable cost enough to keep the business gong temporarily.
When the condition that prompted the survival pricing is gone, product prices
should be reset to the previous or more fitting levels.
2. Maximizing the current profits -A lot of companies seek to earn the greatest
amount in profits, In order to maximize their present protits, companies
approximate their demand and supply of goods and services. The product's
demand and the substitutes existing to fulfill that demand become the bases
for pricing. When the demand is high, the price charged is also high. Seasonal
products such as ham and cheese are expensive during Christmas because of
high demand.

Figure 15 Pricing Objectives
SURVIVAL
MAXIMUM
CURRENT
PROFITS
MAXIMUM
MARKET SHARE
MARKET
SKIMMING
PRODUCT
QUALITY
LEADERSHIP
PRICING
OBJECTIVES

1. Capturing huge market share- Numerous companies priced their products
and services low to acquire greater market share. Market share is a particular
volume of sales established in the light of total sales in an industry. Economies
of scale is a factor in keeping the price low for an improved sales. Greater sales
volume lowers production expenses resulting to increased profits eventually
Keeping the price low particularly when customers are price-sensitive s
termed market penetration. Most fast-moving, consumer goods (FMCo
this pricing method.
2. Market skimming - Market skimming is pricing highly products and services
offered by the companies that utilized innovation, and uses modern technology)
but later reduce the price. The prices are reasonably kept high owing to the
high cost of production acquired because of up-to-date technology. Mobile
phones, electronic gadgets are the best cases of skimming pricing that started
at an extremely high cost and become cheaper with the span of time.

3. Product -quality leadership – Many companies base the price of their goods and
services in line with the quality perceived by their customers. Usually, companies
selling luxury goods generate their high quality, taste, and status image in the minds
of customers for which customers are prepared to shell out high prices. Lavish cars
such as BMW, Mercedes, and Jaguar fashion the high quality with high-status image
among the customers.

SETTING THE PRICE
OF A PRODUCT

Setting the price of a product is a continuing process. It is not sufficient to
set a price, leave it, and suppose it to be lucrative. In its place, companies must
research and study their market landscape regularly and make price adjustments as a
result.
Considerations in Price Setting
Choosing a pricing strategy for a product can be threatening because there
is a lot riding on it. This task can be tackled by breaking it down using these five
considerations:

Every company wants to be definite that its product or service revenue is
sufficient revenue to cover up all expenses. When computing for the cost from
manufacturing up to finally bringing the product to final users every expense
incurred should be included. The final figure must consist of the price of raw
materials, assembly, labor, rental, transport and all other overhead costs. The
average cost per product can be computed by adding all these up and divide by
the number of products produced in a given time frame. Once done, the revenue
to cover all these expenses can be calculated accurately.
Everyone wants to make a profit and not just to break-even. The gross profit
target is the percentage to go beyond tor each item to gain profit.

Here is how to
calculate it with this formula:
Gross Profit Target = (P-C)/P
Where P price and C = cost:
The target percentage often differs according to the type of business For
example, manufacturers and retailers often target 50%. On the hand,
distributors
and retailers usually target something like 30o.

Understanding one's customers will provide the information on precisely
pricing a product. Are the company's customers bargain hunters, indulge on
techy products or value quality? Gaining information about the demographics
and psycho graphics characteristics of consumers can be done through market
research. Common traits among customer base can be revealed with the use
basic database, survey and internet research. A company may engage the service ofa third-party
market research company for a more in-depth study of its consumers
Market research will make obvious the trends particularly the importance of a
product to the lifestyle of consumers. Once proven that the product is something
that consumers cannot live without, a premium price may be set because this price surely will not
discourage them to buy the item.
For instance, Smart phones even though priced highly do not keep millennial s
from buying whenever there is a new version that comes out of the market
Smart phone is part of the millennials' lifestyle.

Companies must know how competitors are pricing their products. The
product's value must be reflected in its price to be competitive. The perceived value
of the product being offered has to be compared with that of competitors. Useful
insights must be collected by conducting market research and making Internet
searches. It is not enough to just rely in knowing the prices of competitors over the
internet. It is also informative to read review sites to dig deeper. If the company's
product obviously offers more value than competitors, a premium price can be
dictated reflecting superior quality. However, if competitors' products are highly
valued by consumers, the company's product may be priced lower but with high-
quality preference.

Tiered pricing is a way of selling products or services at different price points. In
this type of pricing model, the product rates are packaged into individual pricing
tiers. When a tier has been filled up, the product will progress to the next tier and
there will be a different asking price, A good example is buying a car with a choice
between standard or fully loaded one. Tiered pricing is attractive to customers
since this pricing structure permits then to select the price level that suits their
funds. Some companies offer differentiated products using added features. They
price each point based on its reflected individual values. A pricing structure that
considers god, better and best choices for products or services increasing levels of
value can be tried by companies that wanted to apply tiered pricing, This pricing
model is useful when a company desires to penetrate a bigger pie of the market
through giving several options for a range of customers.

Odd number pricing is considered psychological and based on the idea tha
certain prie ranges are more attractive to consumers. This method entails
setting a price using odd numbers like pricing a product at Php 49.99 rather than
Php 50.00
Say for instance, iTunes sell songs at 99 cents instead of $1. In the eyes o a
consumer, a few centavos can mean a lot of difference in savings. Although this
difference may give the impression of being illogical, studies have revealed that
this pricing strategy is very effective for the majority of product types. Once a
company knows that its product is competitively priced and covering all costs,
it can try single-digit strategies to find which best suits its target market. Pricing
a product must combine the economics of the business and the psychology of its
customers. In order to discover the pricing sweet spot, a company must Conduct
market research and competitor analysis,

Pricing strategy in marketing is identifying the most advantageous price for a
product. This strategy is mixed with the other marketing principles such as market
demand, product characteristics, competition, economic patterns as well as the
four P's. The pricing strategy as one of the significant components of the marketing
mix centers on producing revenue and eventually profit for the company. The
success in pricing strategies for all businesses is intensified with precision on
market conditions, an understanding of the consumers unsatisfied want, and the
amount of money consumers are ready to pay to meet such want.
There are four key pricing strategies being used by majority of companies in
all types of industries, namely premium pricing, penetration pricing, economy
pricing, and price skimming. However, there are other important approaches to
pricing, and they are discussed also here.

Figure 16 Price Strategies
ECONOMY PENETRATION
SKIMMING PREMIUM
MARKET PRICING
QUALITY HIGH
LOW
PRICE
HIGH

with a strong competitive advantage. Said strategy works effective for small
Premium pricing is setting a higher price than competitors for a unique brand
businesses and ideally used during the early days of a product' s ite cycle. A higher
price tag calls for a high perceived value from among the costumers. Beside
producing a high-quality product or service, companies must make certain that
their marketing programs, packaging and store decor when combine must support
the premium price. High prices are charged for luxuries.
A good example is Apple, which in no way discounts or offers sales. The
company preserves its status as a premium product this approach. Using premium
pricing plans confines the possible buyer pool, but provides a larger profit margin
and the ability to generate a high quality product.
Another case is Rolex which uses a premium pricing strategy to great
success. If all a person wants is a watch to know the time, he can buy a Timey
for around Php 2,000. The Timex may even have more attractive but superfluous
features than the Rolex, but consumers are willing to pay $10,000 for the Roley
because they perceive the product to be extremely high quality, and it is an
ultimate status symbol.

Premium pricing is highly effective in the following conditions:
1. Early introduction - Premium pricing can be highly successfully instituted
when a product is first launched to the market.
2. Uniqueness- Small businesses that have inimitable products can make a
distinction of their products with higher prices and a quality reputation.
3. Luxury products -Consumers distinguish that the product is a lavish product
and has remarkably high quality or elite design.
4. Strong barriers to entry -Ifa company has paid out a big sum of money to set
up its products as premium merchandise, then competitors would have to use
large amount of money to situate their products in similar category.
5. Limited production - The seller can produce uniqueness through restricting the
quantity of products accessible in the marketplace.
6. No substitutes -Companies can make it complicated for competitors to fake
their products through taking tough lawful procedures every time comparable
products come out.
7. Patents - Possessing a patent or copyright on a design or some other inimitable
element of a product is a powerful restriction to other competitors who might
desire to sell the same products.

In penetration pricing, the asking price for products and services is set
temporarily low compared to standard price to attract buyers with the purpose of
increasing market share quickly. Once the promotion period has ended and this
purpose of adequately penetrating a market is realized, the price is made high.
Certainly, ,companies need to wind up by raising their prices to better echo a good
position within the market. Most of the times, this strategy is done when a new
product is introduced.
Numerous newly established companies apply this practice to divert attention
of their Competitors. Though, penetration pricing does likely to result in an inita.
failure to gain income for the business, However, this could be implemented
successfully when the offered product is mass-Produced because the cost per unit
is typically lower. A business must be able to suck up any loss acquired when
prices are slashed. This is to make certain that there are adequate reserve funds for
the business to remain afloat.
A great example of those companies implementing penetration pricing
strategy is Unilever. Together with skimming strategy, it also espouses penetration
pricing strategy tor some of their products like for Lifebuoy shampoo and soap.
This is typically executed when a company has to go through basic requirements
of life.

The situations in which penetration strategy is mostly implemented are:
1. Penetration pricing strategy is employed to attract consumers when market
saturation situation is at its fullest.
2. It is also used when there is great number of substitute brands existing for
similar product to satisfy the need of the consumers.
3. It is employed by the marketers for products when consumers are price-
sensitive and can make control of the market on basis of price.
4. It is intended for the price-elastic demand products for which there is direct
relation that exists with the price and consumer value their money through
asking low price by adjusting the price of similar product.
5. For those products upon which consumer comes to a decision on the basis of
price differentiation on what to adopt and what product to leave out.
6. It is a strategy used when there exist in the market an adequate number of
products that for its product life the company has to control on low earnings.
7. This price penetration is for the market when there is an opportunity that
current competitors will also shift to low prices in the upcoming time so the
company has to adopt this pricing strategy for new product.
8. It is usually for the products anticipating long life cycle like household items
(soaps, shampoos and conditioners) to attain big market share and lock the
market through progressing with such strategy.

In economy pricing strategy, businesses reduce the costs related with marketing
and production so that product prices can be kept to a minimum. As a consequence,
customers can buy the products they need without add-ons. Most generic food
suppliers and discount retailers use this to draw the most price-sensitive of
consumers.
Economy pricing is very useful to huge companies but can be risky for small
ones. Basically, small businesses do not have as much sales like bigger companies,
It would very difficult to produce enough profit when prices are very low,
Economy pricing is commonly used in the retail food business for groceries
and supermarkets such as canned and frozen goods traded under generic fo
brands which require very little marketing, promotion and production expenses.
Most airlines like Cebu Pacific and Air Asia are very famous on maintaining their
overhead very low that they can offer their customers lower price to fill their
airplanes.
270
For the reason that these companies save on those expenses, they are able to
maintain their pricing low. Companies that use economy pricing rely on the fact
that their lower price in contrast to the product next to them on the shelf will boost
the number of sales. During periods of economic recession, economy pricing is
well-fitted to implement.

Price skimming as a strategy happens when a company sets a temporarily high
price fora product or service particularly during the introductory phase because
it has a substantial competitive advantage. However, the advantage is likely not to
be stable. Once competitor goods appear in the market, the company then drops
its prices gradually due to increased supply. This concept is designed to maximize
sales on new products and services on early adopters to offset maximum money
before the product or segment draws more competitors. Early adopters are those
who are ready to shell out a higher price to have the newest or finest product in
the market.
Price skimming does not only help a small business recover its development
cOsts. It also makes an impression of quality and uniqueness when an item is
initially launched to the marketplace. Good examples of price skimming consist of
pioneering electronic products, like Apple iPhone and Sony PlayStation 3. When
IPhone 4s was introduced in the market several years ago, its price was high. Only
few consumers could really pay for an iPhone. As time passed, prices of the iPhone
4s have dropped off slowly, such that these days a lot of consumers can manage
to pay for an iPhone. The same is true with Sony PlayStation 3. When launched,
it was priced approximately US$ 600 but these days, it is available at around
US$ 300.

Other Pricing Strategies
Here are other pricing strategies being employed by both big and small
companies, namely:
Psychology Pricing
Psychological pricing is setting prices a little lower than rounded numbers.
The idea behind this pricing practice is that customers do not round up these
prices, and so will consider them as lower prices than they actually are. Thus, to
the conventional human mind, Php 299.99 seems closer to Php 200 than to Php
300, just as it begins with number 2. This practice is founded on the principle
that customers are likely to process a price from the left-most digit to the right.
So the tendency is to disregard the last few digits of a price. This outcome shows
to be highlighted more when the fractional part of a price is written in smaller
typeset than the rest of a price. This type of pricing is particularly widespread for
consumer goods.
Psychology pricing is a strategy used by companies to respond on emotional
levels rather than rational basis. The aim of this approach is the raise demand
through forming a fantasy of better value for the customer. The strategy depends
on the nature of human psychology to make prices more striking to consumer.
This pricing is founded on the idea that humans are not absolutely logical and that
certain prices are more striking than others for basis beyond just being lower.

In a bundle pricing, companies trade a package or multiple goods or services
for a lower price than they would charge if the customer purchased all of them
individually. Bundling is very effective to move old stocks and slow selling
products besides enhancing the perception of customers that some items are given
free.
Basically bundling is used effectively by companies that trade complimentary
products. For example, mobile phone retailers normally bundle the prices of several
products and services together for their new customers. They bid the phone itself
with a package that also consists of the 2-year phone plan, internet connection,
and phone charger. This bundle benefits the customer because it gives them every
tool they need for their phone at the same time. It also benefits the mobile phone
retailer since they are selling the customer additional products and services other
than simply a phone.
Blu-ray and video games are frequently sold using the bundle strategy once
they arrive at the last stage of their product life cycle. One might also observe
product bundle pricing with the sale of items at auction. This is where an eye-
catching item may be integrated in a lot with a box of less attractive things so that
the bid would be for the whole lot. It is a good way of promotional pricing too.
In another illustration, a new cellphone could have a case, screen protectors, and a
car charger for a discounted price rather than sold separately.

Product line pricing is splitting products into several price categories to. form
different quality levels in the minds of consumers usually used by retailers.
This
practice becomes effective when enough price gaps are placed between each
category for distinct quality differentials. Each item is typically of various
level of
quality or has special features.
One good example is a car wash business. A basic wash may be priced at
Php60, a wash with wax at P'hp 200 and the whole package could be
Php350.

Optional product pricing method is presenting a low-base price to attract
customers but sell expensive add-ons once they start to buy to continue the
likelihood of producing high customer revenues. It is the optional "extra" that
increases the overall price of the product or service.
A popular example of this strategy is the airline industry. Historically, , majority
of airlines charged higher t ticket prices but allowed customers with a limited number
of bags free of charge and free in-flight snacks. These days, particularly budget
airlines offer tickets that are generally priced fairly low. However, nowadays thes
charge some additional fees for snacks, headphone use, checking kennels for pets
a window or isle seat reservation, added luggage or extra legroom and many other
things. The fees they charged are not small either.

Captive product pricing is offering low price for the core product, but high prices
are set on captive products. This strategy draws customers to the core product
with a low price but provides sellers profit on the captive products, which are
indispensable to use the product.
This type of pricing is used by companies that sell products which have
Complements. Complements are sold in premium prices because customers are
left without choice. Razor manufacturers use this strategy. They set a low price
from the first plastic razor and earn its margin from selling the fitted blades.
Printer manufacturers have the same practice. They sell an ink jet printer at a low
price, Obviously, when consumers run out of the consumable ink, there is no way
but to buy it at a relatively expensive price.

Promotional pricing is artificially lowering the price of a product or service
to enhance value through time-based scarcity perception. When products are
perceived as scarce, they are more given importance than plentiful ones. Hence,
this strategy is short-term.
An example of promotional pricing is when a retailer offers "buy one, get one
free" (BOGOF) products. In this situation, a customer buys one unit of a product
and gets a second one free. Likewise, companies may offer promotions like buy
two, get the third one free. Promotional pricing could also be in the forms of
money
off vouchers and discounts.

Geographical pricing is regulating a product's sale price anchored in location to
reflect shipping or satisfy the market-clearing price in that place. There are several
geographical pricing strategies which are:
1. Point of production pricing - This is the most commonly used strategy when
comes to geographic pricing. Here the seller estimates the selling price at
point of production. The buyer, on the other hand, chooses the transportation
mode and pay all the freight costs, Known also as freight-on-board (rob
factory pricing, the seller does not shoulder any payment for the freignt cost
2. Uniform delivered pricing- The same delivered price is estimated to all buyers
not considering their locations, This strategy is sometimes known as"postage
stamp pricing because of its resemblance to how the first-class mail service 1S
priced.

3. Zone pricing - In this strategy, prices raise as shipping distances increase. h
times concentric circles are drawn on a map with the plant or warehouse at
the midpoint. Each circle defines the border of a price zone. Sometimes n
place of ircles, irregularly shaped price boundaries are used. This is to mirror
geography, population density, transportation infrastructure, and shipping
cost. Majority of petroleum companies use zone pricing. These companies
decide geographical price zones based on the demographics of a definite area
and costs of transportation to the area. The cost incurred is charged to the
consumers.
4. Freight-absorption pricing - A seller may agree to shoulder portion of the
freight cost to enter remote markets. Here a manufacturer shall estimate to the
customer a delivered price equivalent to its factory price and add the freight
cost that would be asked by a competitor situated near that customer. This
strategy is implemented to compensate the drawbacks of FOB factory pricing.
Freight absorption removes any price gain because of differences in freight
costs. It results to a price reduction and is applied as a promotional scheme.

Value-based pricing is a strategy in setting a price based typically on a
consumers' perceived worth or value of the product or service. Recession and
increased competition may compel companies to offer value products and services
to maintain sales. Fast-food restaurants such as Jollibee and McDonalds offer value
meals. Luxury items like a fashion brand with high social status may price items
considering customers' perceptions of value.
Customers feel that they are getting great value for their money by getting
a lot of product. This strategy pays no attention to the prices of competitors and
costs by focusing on what the customer is ready to pay derived from their needs,
preferences and perceptions.
In contrast with other forms of pricing, which are anchored only on numerical
data, value-based pricing observes at the factors consumers think about when
making a value assessment. By means of seeing what measures the consumer uses
in its value decision, the company obtains a better idea of what are important
to the consumer and the motivations he has for buying. Knowing consumers
facilitates marketing teams to devise more effective sales strategies and employ
definite marketing tactics.

Price is an indispensable component of the marketing strategy of every
company. It has a direct influence on the customer, customer buying behavior,
business and on the economy in general. Price for the customer is a key sign of
good quality product and an essential aspect in deciding to buy as well. Thus
Price strategy is most imperative and significant part of a marketing strategy
Numerous companies typically fine-tune their basic prices observing in view
various customer differences and market changing conditions. T a Company
implements effective pricing strategies, it is able to gain better market shares.
Making price adjustment is almost at all times a hard decision. Whether it
15 an increase or a decrease, changes in cost can have a harsh effect on both the
Company and its consumers. This is the reason why it is very essential to change
one's pricing in moderation and to be certain that the decision is supported with
good and convincing reasons.

Here are common reasons to raise prices which include:
1. Inflation - During times of inflation, companies necessitate increasing prices
to sustain profitability.
2. Increased costs - When production costs for the company swell they are
expected to increase their prices to make up for the change in costs.
When a company decides to elevate a price, it has several alternatives on how
to execute that change. If the projected price raise is important, it may be better to
slowly increase the price eventually as opposed to making one great leap. Another
alternative for companies which trade packaged goods is to trim down the amount
of product in every package rather than increasing the price that consumer pays
for each package.

Companies could also need to think of dropping the prices of their products.
Here are some reasons for a decrease in price which include:
1. Answer to competitor's changes - If a competitor drastically lowers its price,
a company may require doing similarly to continue to be competitive.
2. Center on growth - Companies may reduce their prices to enhance their
market share or to Support growth of the market as a whole.
3. Reduced costs - As production costs sink, companies can decide to drop off
their prices also which may make them more competitive while making better
their perception among st customers.
At times the greatest move is to continue the same prices, even though there
are changes in the market Keeping up with the prices is suggested when the
market change would not influence the majority of company income.
In addition, companies must avoid making a change in price until they have
completed sufficient research on how the price adjustment will impact sales. It is
better to leave things in its present condition while a company does due diligence
than to form a speedy, badly planned change that pushed away customers or
damages the profit margins.

CHAPTER 8 PRICING STRATEGY................

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CHAPTER 8 PRICING STRATEGY................