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Implementing Pricing Strategies - Term Paper Example

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Implementing Pricing Strategies Question 1 Contribution is a reward or compensation to a common fund or compilation. It can be referred as the payment which an individual offers for any particular purpose. Besides, the entire contributed amount of an individual is calculated based on price and cost…
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Implementing Pricing Strategies

Moreover, fixed costs and prices are those which are essential for running any business. Hence, these contributions are mandatory for any individual. If an individual is operating any business enterprise, the remunerations, rent and raw material cost among others are considered as overhead or fixed costs. Besides, the employees and general public also gives rise to certain fixed costs and prices such as insurance cost, health cost and medical cost among others. Therefore, fixed costs and prices can be referred to as those expenses which do not change with any alterations in the function of the business. Thus, it can be affirmed that fixed cost and prices relates to those components which are essential for measuring contribution (Avis, 2009). Apart from these, fixed cost and prices charged are also necessary in case of marketing. It facilitates in predicting the earnings of a business generated by varied modifications in ‘unit sales’ as well as the impact of anticipated promotions. Hence, both cost and price play a significant role in contribution. In addition, these uncertain variables might prove indecisive due to changing needs and demands of customers. When the demand of a particular product or service is high, the amount of contribution might also be increased in order to attract the premium group of customers. It would enhance the market share and profitability of an organization as well as improve the brand identity. Similarly the contribution percentage or investment should be lowered at the saturation stage of a product or service to avoid incurring huge loss. Thus, it can be avowed that determination of uncertain variables such as cost and price is entirely based on the demand of product or service (Bloom, Bond & Reenen, 2007). Hence, these tentative components should not be considered as fixed, because it entirely depends on the demand fluctuations in the market with high possibility of changing values. Question 2 Pricing strategy is referred as the idea of implementing an optimum price, based on the features of the particular product or service. The prime objective behind the notion of shaping pricing strategy is to capitalize profit thereby enhancing the total sales of specific product or services. There are varied types of prices such as ‘cost-plus-pricing’, ‘skimming pricing’, ‘penetration pricing’, ‘value-based pricing’ and ‘target pricing’ among others. Moreover, the pricing strategies are mainly implemented based on the competition of product or services in the market. In addition, price of products and/or services help to determine the sustainability and consistency of a brand in the market among others. Thus, it can be affirmed that pricing policy is one of the significant decisions of product or service of an organization. However, at times, determination of pricing strategies of products and/or services also creates conflict among the employees of an organization thereby hindering their dedication towards work. Hence, pricing strategies also hamper enthusiasm and employee morale which might prove detrimental for an organization (Avis, 2009). Pricing strategy is a tool which is utilized in order to enhance the profit of an organization augmenting the demand of products and/or services in the market. Moreover, at times, experienced managers also had to change the ... Read More
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