Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organization. The remaining 3p’s are the variable cost for the organization. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organization. Pricing should take into account the following factors:
1. Fixed and variable costs.
2.
Competition
3.
Company objectives
4.
Proposed positioning strategies.
5. Target group and willingness to pay.
Product mix
pricing strategies
1. Product/service line pricing:
Setting price steps between
various products in a product line based on cost differences between the
products, customer evaluations of different features and competitors and
service line items.
Example: An
example would be a DVD manufacturer offering different DVD recorders with
different features at different prices eg A HD and non HD version.. The greater
the features and the benefit obtained the greater the consumer will pay. This
form of price discrimination assists the company in maximizing turnover and
profits.
2. Optional-product pricing: Pricing optimal or accessory products sold with the
main product. The organization
sells optional extras along with the product to maximize its turnover.
Example: This strategy is used
commonly within the car industry as i found out when purchasing my car.
3. Captive-product pricing: Pricing
products that must be used with the main product
4. By-product pricing: Pricing low–value by-products or services to get rid
of them,
5. Product-bundle pricing: Pricing bundles of products sold together. The organization bundles a group of
products at a reduced price. Common methods are buy one and get one free
promotions or BOGOF's as they are now known. Within the