PRICING STRATEGY

Tabajonda, Clyde Jefferson N.

Pricing Strategy

2.4 BSBA Marketing

Mr. Bernard Evan V. Jamon

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I learned a lot in pricing strategy like the Pricing Policy by which a company determines

the wholesale and retail prices for it’s product and services. And this are the following

policy. First, Cost Based Pricing is one of the pricing methods of determining the selling

price of a product is determined by adding a profit element in addition to the cost of

making the product. Second, the Value Based Pricing is the pinnacle of pricing. Third,

Demand Based Pricing is a pricing method based on the customer’s demand and the

perceived value of the product. In this method the customer’s responsiveness to

purchase the product at different prices is compared and then an acceptable price is

set. Lastly is Competition Based Pricing the price of competing products is used a

benchmark. The business may sell it’s product at a price above or below such

benchmark. Setting a price above the benchmark will result in higher profit per unit but

might result in less units sold as customers would prefer products with lower prices. And

the Pricing Strategy refers to the method companies use to price their products or

services. Almost all companies, large or small, base the price of their products and

services on production, labor and advertising expenses and then add on a certain

percentage so they can make a profit. There are several different pricing strategies,

such as penetration pricing, price skimming, discount pricing, product life cycle pricing

and even competitive pricing. And the Penetration Pricing or Pricing to Gain Market

Share A few companies adopt these strategies in order to enter and gain market share.

Some companies either provide a few services for free or they keep a low price.

Economy or No Frill Low Price is The pricing Strategies of these products are

considered as no frill low prices where the promotion and the marketing cost of a

product are kept to a minimum. Economy pricing is set for a certain time where the
company does not spend more on promoting the product and service. Use of

psychological pricing strategy Psychological pricing Strategies is an approach of

gathering the consumer’s emotional respond instead of his rational respond. Pricing

Strategies of Product Line is defined as pricing a single product or service and pricing a

range of products. Pricing Optional Products It is a general approach, if the companies

decrease the price of a product or a service they do increase their price for their other

available optional services. Pricing of Captive Product have products that compliment

the products without which the main product is of no use or is useless. Pricing for

Promotion, Promotional pricing is very common these days. You will find it almost

everywhere. Pricing for promoting a product is another very useful and helpful strategy.

Pricing as per Geographical Locations, Geographical pricing is the practice of adjusting

an item's sale price based on the location of the buyer. Sometimes the difference in the

sale price is based on the cost to ship the item to that location. But the difference may

also be based on what amount the people in that location are willing to pay. Companies

will try to maximize revenue in the markets in which they operate, and geographical

pricing contributes to that goal. Value pricing a product is reducing the price of a product

due to external factors that can affect the sales of the product. Pricing of premium

products this strategy works just the other way round. Premium products are priced

higher due to their unique branding approach. A high price for premium products is an

extensive competitive advantage to the manufacturer as the high price for these

products assures them that they are safe in the market due to their relatively high price.

Premium pricing can be charged for products and services such as precious jewellery,

precious stones, luxurious services, cruses, luxurious hotel rooms, business air travel,
etc. The higher the cost the more will be the value of the product amongst that class of

audience. I learned also the Customer Driven Pricing Is a price based on how a

customer is willing to pay a certain price when the value delivered exceeds that cost.

Also is the Customer Based Pricing Is a pricing method that makes use of competitors

prices for the same nor similar product as basis in setting a price. The business may sell

its product at a price above or below such benchmark. Example of this is the vendor

who sale Tempered Glass for 50 pesos in all units of phone. Value Based Price Is a

price based on how much customers are willing to pay for the product, considering the

value it offers. Also is the Pricing Objectives is giving direction to the whole pricing

process, and determining what your objectives are is the first step in pricing. Also is the

Common Pricing Objectives is maximizing long and short – run profit, Increasing sales

volume, monetary sales and market share, Obtaining a target rate of return on

investment, Stabilize market or market price, Company growth, Discourage new

entrants to the industry, Match competitors prices, Maintain price leadership, Enhance

the image of the firm, brand, or product, and Use price to make the product visible. Also

is the Factors that will influences your product pricing strategy. This are the following

factors. First is Level of Competition, Second is Perceived value of product, Third is

Product development cost, Fourth is Economic trend, Fifth is level of market demand,

Sixth is demographic, Last is Class of target customers. Also that I learned is the Cost.

Cost is the value of money that has been used up to produce something or deliver a

service, and hence is not available for use anymore. And in business, the cost may be

one of acquisition, in which case the amount of money expended to acquire it is counted

as cost.
Value Creation is any process that creates outputs that are more valuable than its

inputs. This is the basis of efficiency and productivity. These are the examples of Value

Creation. First is the commodities this process creates value from resources like a

farmer uses land, equipment, water, labor, sunlight, and seeds to grow onions. Second

is products a firm manufacturers eye glass frames have greater value on the market

than the cost of inputs such capital, labor, energy and materials. Third is services A

bank uses technology, labor and capital to offer mortgages to customers. This has value

to customers as it allows them to pay for a property as they use it. Fourth is processes

A customer support process takes customer issues and inquire and uses technology

and labor to resolve the issue of answer the question. This has value to the customer.

So much so that a customer may only purchase products and services that offer

customer support. Fifth is machines A machine in a job shop drills holes in metal. This is

part of a value creation process that creates parts for high speed trains from materials.

Sixth is Information Technology A software service takes inputs such as data and

computing resources to generate monthly customer invoices. This has value to a firm as

they need to send customer’s invoice in order to collect revenue. Seventh is work A

craftsperson use labor and tools to create a canoe from wood. Eight is knowledge A

designer uses software to create a design for a chair. The design may have value as

chairs with a useful and attractive design may command high demand on the market.

Generally speaking, design is a significant factor in the perceived value of goods and

services. Also I learned that price segmentation is a suitable strategy, if you have a

narrow product range and can identify groups of prospects who would buy if the price

was lower or who would be prepared to pay a higher price in return for a factor that they
felt added value to the product. And I learned also the segmentation Is a technique used

to identify and satisfy the needs of specific groups of customers with similar

requirements within a market. And segmentation is an alternative to offering a “one size

fits al” product to all market. Buyers means A market in which goods are plentiful,

buyers have a wide range of choice, and prices tend to be low- compare. And there’s a

three types of buyers average spenders, tightwads, and spendthrifts. The average

spenders is the spend on an item that they think makes a good investment while trying

to save. They still indulge but within reason while the tightwads are people that spend

less and love saving money before they hit their maximum “buying pain”. They do not

enjoy spending money. And the spendthrifts the smallest percentage of buyers, but they

are the most fun to market to. People that spend more before they hit heir maximum

“buying pain”. These people will spend until they max out that credit card, then reach for

the next credit card and keep going. And the Purchase- is the organized acquisition of

goods and services on behalf of the buying entity. A product or service that has been

bought by an individual or business. And the location Higher prices in locations with less

competition or in which less price-sensitive shoppers. Provides permanent facilities for

movement of goods (such as customs, storage, and other support services) or is

designated for stated purpose. And the time What is ‘reasonable’ depends on what

constitutes acceptable standard of fair dealing under the circumstances while taking

current commercial practice in that trade into account. Also the quantity The extent size,

or sum of countable or measurable discrete events, objects, or phenomenon, expressed

as a numerical value. And this is what I learned in the Pricing Strategy and I hope that I

can apply all those learning In my business.