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Pricing Decisions - Essay Example

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PRICING DECISIONS Name: Tutor: Course: Date: Abstract In the context of marketing, pricing decisions are critical conceptual tools used by an organization in responding to its marketing objectives. In actual business environment, setting price for products and services proves as one of the most agonizing undertaking for marketing personnel…
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Pricing Decisions

All the articles provide a framework through which managers and stakeholders within the marketing environment can understand pricing dynamics. In order to enhance objectivity of results obtained, these articles employ the use of scientific research processes in acquiring information. Therefore, findings at the end of each article reflects experimental results on pricing policies, efficiency of pricing models and the relationship between pricing decisions and productivity. Introduction In actual marketing context, product and service pricing plays a significant role in influencing attitude of current and potential consumers. In a competitive environment, consumers may avoid purchasing goods from a given manufacturer because of higher prices compared to other producers in the industry. On the contrary, Kunnumkal and Topaloglu (2010) say that setting product and service prices depend on the production cost as well as profitability objectives of an organization. In this case, any producer has to reach a compromise between retaining consumers and pursuing its goals of profit maximization. According to Hoseason (2003), pricing models and policies contained within these articles proposes empirical mechanisms through which producers can achieve such an essential compromise. One article holds the opinion that pricing decisions should be in line with observed or expected customer behavior. In this case, all decisions regarding product price should take into consideration implications resulting from implementing adopted policies. Contrarily, other articles insist on the role of production cost in determining market price of products and services. Such a model seeks to establish an economic balance between production efficiency and pricing policies. Importance of the Study With respect to significance of information contained within the articles, one should acknowledge the fact that empirical pricing models are instrumental in responding to real world marketing problems. In practical context, the economic forces of demand and supply may not prove realistic and responsive in explaining price elasticity. According to Mandy (2009), prices may be affected by other variables like distribution mechanisms, marketing channels and retail strategies. In this case, manufacturers need to appreciate resourcefulness of experimental approaches in making pricing decisions. Low price on products and services may induce customers’ propensity to make buy decisions. However, setting such low prices should be in synchronization with other determinant factors like cost of manufacturing and expected revenue of an organization. According to Leo, Chris and Verma (2012), certain market segments, especially those involved in tangible products are known to being more price sensitive compared to service delivery markets. In such cases, pricing decisions should be a function of price sensitivity variables and expected revenue. This explains why pricing policies are formulated after thorough consideration to aspects of marginal costs and profits. Article 1 - Retailer Dynamic Pricing and Ordering Decisions: Category Management versus Brand-by-Brand Approaches, Kopalle et al, 2010. According to Kopalle, Hall and Krishna (2010), the aim of this article is to determine the effects of category management in influencing ordering decisions and sustaining profitability at a given pricing levels. It seeks to develop an empirical ... Read More
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