Welcome to my pricing strategy.
Basic pricing strategy
To develop an appropriate pricing strategy firm must clearly define goals pricing. The objectives of the analysis are determined by its position in the market and the general objectives of the operation in the market. The objectives contribute to the implementation of the marketing strategy.
One must bear in mind that there are a set of factors that influence the level of prices mounted. The degree of influence they can be placed in the following order:
- Costs of production;
- Price competition;
- The value of demand;
- transportation costs;
- Discounts and allowances intermediaries;
- Advertising and other methods of sales promotion.
The next group of factors external environment refers to the institutions with which business contacts in the business. They are consumers (buyers) competitors intermediaries.
Pricing strategy pursues various goals that coincide largely with the behaviors of the company in the market environment:
* maximize current income;
* leadership in quality products;
*leadership in reaching the market;
*, ensure the survival of the market.
The strategy of maximizing profits used in the conditions, if the company offers unique products or the demand for certain products exceeds supply.
In conditions of high market saturation situation arises when a firm sells its goods at any price to stay on the market.
Choosing strategies aim to achieve price leadership in quality, the company ahead of the competition by trying to release high-quality products. In this case, improving the quality of goods means tend to increase prices.
Various objectives pricing strategies to gain market leadership, implemented in the early stages of product life cycles - must use high enough price on the stages of growth and saturation.
Pricing strategy - a selection of the possible dynamics of the original price of goods in the market that meets the objectives of the company.
In developing an appropriate pricing strategy is of great importance degree of novelty goods, so that the development of prices for new and unique products is fundamentally different from existing products and prices.
Market new and unique products created by marketing activities. Advertising costs, "launch" of the goods is quite large, so you need to strengthen the position of the product on the market.
In practice known and most common pricing strategies for new and unique products are the strategy of "cream skimming" strategy and market penetration. The like of strategy trusts on the peculiarity of the goods, that is, the degree of innovation; competitive conditions; characteristics of the market and marketing; production costs and expected profits, the firm's image.
The strategy of "cream skimming" involves selling goods at high prices in the early stages, which is much higher than the cost of production.
The named strategy is very effective if there will be some conditions:
* introduction of new products, patents;
* appearance of fascinating product features;
* high current demand of a large number of customers;
* low elasticity of demand;
* high initial price for competing firms;
* perception of high prices by buyers as a guarantee of high quality. The high initial price usually gives advantages in obtaining not only profits but in the short term costs of production. A classic example of the approach to pricing in the sector in the 70-80-m years. All of novelties calculators that originally sold for $ 200 each and then the price dropped to $ 5 per unit.
The strategy of "cream skimming" mass drawbacks. They are that, first, this strategy attracts competitors, secondly, the high initial price may affect the length of product life cycles, and sometimes lead to commercial failure.
In some cases, using the strategy of "cream skimming" a sharp fall in prices, which is also a bad thing because in practice using a strategy of market penetration. The essence of this strategy is the use of medium and low prices for new products.
This allows you to stimulate sales, to eliminate competition, to expand production and to stabilize the market share of sales. Companies due to low initial price to capture market maturity and raise prices. This strategy meets the core objective of the company - to maintain profits in the long run. With the growth and expansion of the production and marketing of reduced unit costs, which enables lower prices and further expand the market. This strategy inherent famous Japanese companies producing computers and printers for the US market.
For the successful market promotion of new products used as a strategic method of targeting leader. It is used when the market is dominated by a few companies that are conventionally divided it among them.
In this situation, one of the firms, whose share is the most significant, recognized basic price leader? Pricing strategy with a focus on price leader involves adapting their prices to the level of price leader in a particular market.
Prices for new products may vary but within certain limits. If very little difference in the new products compared with the majority in particular market goods, the closer the prices for new products to a "standard" price leader. The US leader to create such a computer is "IBM." She is a trendsetter in the ground of efficiency, price and other indicators of competitiveness.
To develop an appropriate pricing strategy firm must clearly define goals pricing. The objectives of the analysis are determined by its position in the market and the general objectives of the operation in the market. The objectives contribute to the implementation of the marketing strategy.
One must bear in mind that there are a set of factors that influence the level of prices mounted. The degree of influence they can be placed in the following order:
- Costs of production;
- Price competition;
- The value of demand;
- transportation costs;
- Discounts and allowances intermediaries;
- Advertising and other methods of sales promotion.
The next group of factors external environment refers to the institutions with which business contacts in the business. They are consumers (buyers) competitors intermediaries.
Pricing strategy pursues various goals that coincide largely with the behaviors of the company in the market environment:
* maximize current income;
* leadership in quality products;
*leadership in reaching the market;
*, ensure the survival of the market.
The strategy of maximizing profits used in the conditions, if the company offers unique products or the demand for certain products exceeds supply.
In conditions of high market saturation situation arises when a firm sells its goods at any price to stay on the market.
Choosing strategies aim to achieve price leadership in quality, the company ahead of the competition by trying to release high-quality products. In this case, improving the quality of goods means tend to increase prices.
Various objectives pricing strategies to gain market leadership, implemented in the early stages of product life cycles - must use high enough price on the stages of growth and saturation.
Pricing strategy - a selection of the possible dynamics of the original price of goods in the market that meets the objectives of the company.
In developing an appropriate pricing strategy is of great importance degree of novelty goods, so that the development of prices for new and unique products is fundamentally different from existing products and prices.
Market new and unique products created by marketing activities. Advertising costs, "launch" of the goods is quite large, so you need to strengthen the position of the product on the market.
In practice known and most common pricing strategies for new and unique products are the strategy of "cream skimming" strategy and market penetration. The like of strategy trusts on the peculiarity of the goods, that is, the degree of innovation; competitive conditions; characteristics of the market and marketing; production costs and expected profits, the firm's image.
The strategy of "cream skimming" involves selling goods at high prices in the early stages, which is much higher than the cost of production.
The named strategy is very effective if there will be some conditions:
* introduction of new products, patents;
* appearance of fascinating product features;
* high current demand of a large number of customers;
* low elasticity of demand;
* high initial price for competing firms;
* perception of high prices by buyers as a guarantee of high quality. The high initial price usually gives advantages in obtaining not only profits but in the short term costs of production. A classic example of the approach to pricing in the sector in the 70-80-m years. All of novelties calculators that originally sold for $ 200 each and then the price dropped to $ 5 per unit.
The strategy of "cream skimming" mass drawbacks. They are that, first, this strategy attracts competitors, secondly, the high initial price may affect the length of product life cycles, and sometimes lead to commercial failure.
In some cases, using the strategy of "cream skimming" a sharp fall in prices, which is also a bad thing because in practice using a strategy of market penetration. The essence of this strategy is the use of medium and low prices for new products.
This allows you to stimulate sales, to eliminate competition, to expand production and to stabilize the market share of sales. Companies due to low initial price to capture market maturity and raise prices. This strategy meets the core objective of the company - to maintain profits in the long run. With the growth and expansion of the production and marketing of reduced unit costs, which enables lower prices and further expand the market. This strategy inherent famous Japanese companies producing computers and printers for the US market.
For the successful market promotion of new products used as a strategic method of targeting leader. It is used when the market is dominated by a few companies that are conventionally divided it among them.
In this situation, one of the firms, whose share is the most significant, recognized basic price leader? Pricing strategy with a focus on price leader involves adapting their prices to the level of price leader in a particular market.
Prices for new products may vary but within certain limits. If very little difference in the new products compared with the majority in particular market goods, the closer the prices for new products to a "standard" price leader. The US leader to create such a computer is "IBM." She is a trendsetter in the ground of efficiency, price and other indicators of competitiveness.
The strategy involves prestigious prices for goods at high prices and is designed for market segments that pay special attention to the quality of products and brand.
Strategy prestigious prices are possible only in case of high prestige company and its products in terms of minimal competition. Featured products these firms differ in terms of quality, delivery time, marketing network, the pace of updates, maintenance, and after-sales service.
The comprehensive strategy to stimulate sales or unprofitable leader used during the sale of wholesale consignments.
For example, companies that manufacture agricultural machinery offered in the complex machinery Curtain and trailers to tractors.
Strategy unprofitable leader is kind of a situation where the company deliberately lowers prices for their products in large amounts. For example, the company "Ford" produced mustang price of only 2368 dollars, which involves an extensive demand. Over time, the company began selling more devices and thus provided additional cash flow.
The strategy is the robust descending price if the firm is firmly protected from competition; price falls and rises in demand on price. It should be noted that the decrease in prices leads to short-term sales growth, not contributing to the growth of loyalty. Building long-term contact with the customer is a specific approach to pricing and discounts is not limited solely to a general decline in prices.
Strategy prevailing prices is a continuation of strong penetration. It is used in jeopardy invasion of competitors in your market.
Depending on the market position and intensity of competition in the company may choose different pricing policies (Table 5.2).
Table 5.2 - Pricing based on competitive market
Market conditions
The price level
I. Lack of competition
Setting prices at such a high level that only the market can take
2. Intense competition
Price should be adapted according to the prices of competitors
3. Strong brand
Setting high prices
4. Strongest brand
The ability to dictate prices
Note that price competition is not specific to known and leading organizations. They will compete in other areas (quality of service, service, product functionality, etc.).
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