Friday, July 31, 2009

Price Management

New product pricing strategy, Product mix pricing strategy, responding to price change.
Price is the one element of the marketing mix that produces revenue, the other element produce cost. Pricing also communicates to the maker the companies intended value positioning of its product or brand.Price is usually expressed in terms of money. It can also be a combination of money and other items of value. Price is generally closely guarded business secret. It is an important positioning variably.

The firm has to consider many factors in setting its pricing policy. Following are the six steps of pricing policy.

1. Selecting the Pricing Objective
2. Determining Demand
3. Estimating Costs
4. Analyzing Competitors cost, price, and others
5. Selecting a pricing method
6. Selecting the final price

Pricing Strategy

Pricing strategies usually change as the product passes through its life cycle. Hence, organization used different price in different stage of product life cycle. We can differentiate between pricing a product that imitates existing product and pricing an innovative product.

Product Mix pricing Policy;

1. Product Line Pricing
2. Optional Feature Pricing
3. Product Bonding Pricing:
Salver offer bundle product and features. Pure Bundling, if one company sign Bhusan Dahal, they had to use all other talent associated with Mr. Dahal and company, such as cameraman, graphic, editing etc. and In mix bundling, the seller offers goods both individually and in bundle.

4.Captive Product: Some product require captive product to use, such as razor and camera. Hence, company charge less on razor and camera but price high for blade and film. Similarly, if you buy one year secretion form Mere mobile, they will offer one mobile free.

5.By Productive Pricing
6.Product Bundle Pricing
7.Two Part Pricing

Service firm and organization often charge two part pricing. Take example of Nepal Telecommunication, any sorrier of Nepal Telecommunication Post paid mobile or Land line has to pay certain fixed charge on monthly basis and additional if they used any more. Similarly, if you visit Doctors, you have to pay fix charge for each visit and if you need any other facility you have to pay extra as two part pricing.

Initiating and Responding to Price Change:

Company often has to go through various problems, it may have to cut the price or increase the price as per the requirement of environment.

Initiating the Price Cuts:
Company has to use price cut as the pricing strategy to gain market share or hold more volume and build possible traps.

• Low Quality Trap
• Fragile Market share trap
• Shallow pocket trap

Initiating Price Increase:

If a company increase price, it may get good margin of profit if it is able to raise price as required or it may face a big trap that lead to end of organization.

Why company has to increase price?

• Cost Inflation
• Anticipatory Pricing
• Over Demand

Reaction to price change:
Any change in pricing will bring some reaction among customers, competitors and distributors.Customer often questions the motivation behind the price change. If they cut the price customer may say, that the product is of low quality, unsold product, financial treble .In similar manner, if price is hiked, sale may detour but carry positive message such as product is hot.Competitor may react differently, hence company has to understand, how the competitors are take the price change.

Responding to competitors price change:

It needs to know

Whey competitor changes the price?
Does the competitor plan to make change temporary or permanent?
What will happen to companies market and market share?
What are competitors and other firm’s response likely to be to each passable action?

What it can do?

1. Maintain Price
2. Maintain price and add value
3. reduce Price
4. Increase price and improve quality
5. Launch a low price fighter line

No comments:

Post a Comment