Pricing - Research Paper Example

Introduction: Pricing is an important factor in any business and it is this aspect that brings the product and its s together. There are different kinds of pricing for a company and the pricing strategy varies from a start up company and an established company. Pricing strategy is the task of the top management with the help of middle level and low level management. This is done by analyzing the local and the international market, clear method of analyzing the conditions where a successful marketing can be carried out. Pricing is the process of influential decision making on the benefits the company will earn on its business. Pricing features are manufacturing cost, place, current market situation, and value of manufactured goods. Pricing is considered as a significant factor in the economic pricing allotment theory. Pricing is an elementary factor for generating finance besides the troll to help optimization of profit. It is also considered as the essential Ps of the marketing mix, alone with the other three characteristics of product, promotion, and place. Price is the single “income creating” component along with the four Ps which are only the sources of cost. Pricing is a repeated physical process which has a direct bearing or sale orders. Aspects such as a predetermined amount, mass break, backing or sales movement, precise dealer quote, price existing on entry, consignment or charge date, mixture of numerous instructions or lines etc will also influence pricing decisions. Computerized system necessitate extra complex and perpetuation but may avoid pricing errors. The requirements of customers can be transformed into demand only if the consumer has the readiness and capability to acquire the product and it comes with a reasonable price. Thus price is extremely significant in marketing. “Through systematic pricing policies and strategies, companies can reap greater profits and increase or defend their market shares. Setting prices is one of the principal tasks of marketing and finance managers in that the price of a product or service often plays a significant role in that product's or service's success, not to mention in a company's profitability.” (Pricing policy and strategy, 2010, para.1). There are various methods to price the goods manufactured. Launching a pricing policy is an action that must be finished before established merchandise expansion. The only method to precisely decide how much currency we can afford to expend on expansion, hold up, promotion other expenses connected to manufactured goods, is to examine how much of that manufactured goods will put up for sale, and at what cost. This process is the essence of an efficient pricing policy. Organisations implement a variety of policies and it is mainly is to maximize the promotion of this segment to proper markets. The objectives should give supervision for all decisions which includes capital, human resources and market promotion. Equally important is the fact that objectives must be assessable statements as to what the industry wishes to achieve within a certain time. “Fixing the right price for a product is the most difficult task as it affects the volume of sales of the product of the firm as well as the profits of the firm. Although non-price factors have become more important in recent decades, price remains one of the important elements in determining the market share and profitability. Prices are set by a firm by taking into consideration factors like costs, profit targets, competition and perceived value of products.” (Pricing your product, n.d, para.1). Pricing strategy varies from product to product and from company to company. There are different methods adopted by companies in fixing the prices and the pricing policies have to be set by a proper analysis. Market research is also necessary prior to the fixing of price and these elements serve the objectives of pricing for the success of the product, “Broad categories of Pricing Methods Cost-based pricing Demand-based pricing Competition-oriented pricing Value-pricing Product line-oriented pricing Tender pricing Affordability pricing Differentiated pricing” Objectives in Pricing: Profit maximization in the short term Profit optimization in the long run A minimum return on investment A minimum return on sales turnover.” (Chawla, 2003, p.2). The price of a product is decided after a careful evaluation of the cost involved together with the concealed expenses, the profits level of the possible consumers in the marketplace sector, the number of competitors existing in the segment market. Price of the product will also consider the asset made in developing the particular industry. Pricing is one of the marketing mixes of the product which influence purchasing decisions of consumers. Most of the times, consumers compare the price of a product with its quality. So, price of particular product will largely depend upon its quality. If the firm sells its manufactured goods at high price it will facilitate the firm to make huge earning in a small time. On the other hand, if the firm sells its product at lower price it will lead to intense competition with other players in the field. Pricing decision of product comprises list of prices, discount offered, leasing etc. Organisation can also fix the price of the product on the basis of demand in the given market. Price discrimination is the one of the significant factor affecting the prosperity of the organisation. Also, one of the most important thing is that price must cover assets prepared to improving sales as well as to attract customers to particular products. Some of the industries target the privileged groups and plan lavish packages by way of distinctive attractiveness to cater to an elite clientele. We think that there are four essential mechanisms to a booming pricing policy: 1. “Costs. Focus on your current and future, not historical, costs to determine the cost basis for your pricing strategy. 2. Price Sensitivity. The price sensitivities of buyers shift based on a number of factors and your pricing strategy must shift with them. 3. Competition. Pay attention to them, but don't copy them . . . when it comes to pricing strategy they may have no idea what they're doing. 4. Product Lifecycle. How you price, and what value you provide for that price, will change as you move through the product lifecycle.” (Product pricing strategies, n.d, para.2). By-product pricing: A pricing technique employed in circumstances where a profitable by-product emerges in the manufacturing procedure. In the case if the by-product has only a small value and is expensive to discard, it will probably not influence the pricing strategy of the main goods. In contrast; if the by-products has high value, the producer may obtain a competitive benefit by charging a lesser price for the main goods. The perfect price for any merchandise or any kind of service is one that is satisfactory to both consumer and seller. From the consumer’s or purchaser’s point of view, the right price is a job of merchandise to obtain value and other aggressive alternatives in the market. From the seller's point of view, there are many possible pricing aims. But the fundamental concern for approximately every small trade is to price goods to make best use of sales and earnings. It also tries to sufficient margin to look after appropriate marketing and overhead operating cost. The following stages are suggested for willpower of invention pricing for any size of the business establishment: 1. “Analyze the size and composition of your target market. 2. Research price elasticity for your product. 3. Evaluate your product's uniqueness. 4. Select your channels of distribution. 5. Consider product life cycles. 6. Analyze your costs and overhead. 7. Estimate sales at different prices. 8. Consider secondary pricing strategies. 9. Select final pricing levels.” (Small business guide: Pricing your products. (2010). Bata Shoe Company: About the company: Bata is one of the world's reputed retailers and manufacturers of the foot-wears. They have operations in 5 continents directed by 3 area business units (MBUs). The MBU offer eminence resources in a function of vital areas the company like markets such as manufactured goods sourcing or selling support. Each MBU is industrial in nature, and can rapidly adjust to change occurring in the market and tries to identify potential expansion opportunities. Bata's potency is present in the universal presence. Whilst local branches are independent, every one benefits from its relation to the global organization for back-office systems, improvement of products and source. The Bata Shoe Company’s pricing is a very interesting way of pricing, they follow the psychological pricing strategy, where they give the feeling of the prestigious product and the same time the feeling of less amount for the product according to them, “Price has a psychological value. Buyers will buy a high priced product because they believe that the high price is a good indicator of value. But they may not buy because it may be too costly so do you think Psychological pricing an effective strategy.” (Is psychological pricing an effective strategy, 2010, para.1). The analysis of this shoe company value helps in identifying various kinds of prices fixed on the product and how they help in the promotion and the sales of the product, according to the Bata policies. Price has a psychosomatic worth. Buyers go for a high priced product because they consider that the elevated cost is a pointer to the high-quality of the product. Price is also connected to the group to which it is targeted. Irregular pricing structure is another aspect of the strategy. The customer reacts on an exciting rather than a normal basis to these factors. This strategy is focused on the personality and self illustration of buyers. Reference List Chawla, A. (2003). Pricing & costing. Google Docs. Retrieved November 24, 2010, from http://docs.google.com/viewer?a=v&q=cache:aKshKAw7UTgJ:www.hindustanstudies.com/files/pricing.pdf+bata+pricing+policy&hl=en&gl=in&pid=bl&srcid=ADGEESi6OHbBfSCkimIUEdNbSprCA1V0sZgramiUjx2npOd3Uu0hwjeVDeJslXxH-tufZAs1daNWNIbATF5_R5FQnjrk_EHPQU7k9llAmP4xsOWSRd4pX8U78B5VJ7YjX8CG64mZEETu&sig=AHIEtbQ2T1fLckqeOsGqn_IdO3VS6z3Iug Is psychological pricing an effective strategy? (2010). Toostep. Retrieved November 24, 2010, from http://toostep.com/debate/is-psychological-pricing-an-effective-strategy- Pricing policy and strategy. (2010). Reference for Business. Retrieved November 24, 2010, from http://www.referenceforbusiness.com/management/Or-Pr/Pricing-Policy-and-Strategy.html Pricing your product. (n.d.). Business.Gov.In. Retrieved November 24, 2010, from http://business.gov.in/starting_business/infrastructure.php Product pricing strategies. (n.d.). Markitek. Retrieved November 24, 2010, from http://www.markitek.com/articles/pricing.htm Small business guide: Pricing your products. (2010). Business Owner’s Tool Kit. Retrieved November 24, 2010, from http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P03_5200 Read More