Pricing Strategy Consulting Business Table of Contents The Scenario 3 Pricing Policy 4 Analyzing the best price setting process used to establish sustainable and profitable prices 5 Key pricing considerations and strategies 6 Challenges of effectively implementing a new or updated pricing strategy 8 Differentiating between incremental and avoidable costs 8 The Scenario Pricing has always been an important part when deciding upon the product or in launching of a new product…
Out of the three options, the most profitable and widely accepted one is number three. Most organizations falsely believe that they are competent at pricing, whereas the case is totally different (Daly, 2002, p. 1). Thus, it is necessary to price the product at a right price in order to attract the target market and gain profits. This paper aims to discuss the pricing strategy adopted in the launch of a new product. The scenario describes a company launching a new product. The organization has sought the help of a consultant in deciding upon the price. The client deals with luxury goods and has decided to launch perfume targeting the high-end segment of the society. The perfume introduced will be segmented both for men and women. Therefore, it is necessary to decide upon the price so as to attract the consumers and make the product profitable and well accepted by the target market. The client has asked the help of the consultancy in deciding upon the pricing of the product. The business deals in luxury goods; as a result, they cannot charge a comparatively low price as compared to its other luxury goods. Therefore, pricing strategy should be decided based on the product and the business strategy which it has adopted for over the years. Pricing Policy Pricing has been termed as one of the important aspects in branding and marketing strategy as pricing is considered one of the first and foremost indicators of a brand positioning with respect to its consumers. Pricing is also the most flexible factor out of the 6 Ps of marketing mix as it can be modified at an ease (Okonkwo, 2007, p. 140). Pricing policy determines the way or the technique used by the company to set its prices for its product. One of the simplest ways to set price is through uniform pricing policy. The most profitable pricing policy is the price discrimination because in this case each of the unit is priced based on the benefit that the unit provides to its respective buyers. The next profitable pricing policy is direct segment discrimination. Here the seller should be able to directly identify the various potential segments. Next to direct segment discrimination is the indirect segment discrimination. The least profitable pricing is the uniform pricing. Therefore based on the above discussion, it would be advisable to the client to adopt the pricing policy of complete price discrimination as in this pricing policy the marginal benefit equals the marginal cost which would benefit the client. Each of the buyers would be charged a maximum price that the customers are willing to pay and it is applicable as the product is targeted to the high-end segment of the customers. This pricing policy would extract a much higher price for its units that would be sold (Png & Cheng, 2001, p. 1-3). There are six steps in setting the pricing policy which includes selecting the pricing objectives, determination of demand, estimating the cost, analyzing the cost of its competitors, selecting the pricing method and finally selecting the final price (Kotler, 2007, p.241). Figure 1: Pricing Policy (Source: Kotler, 2007, p.241) Analyzing the best price setting process used to establish sustainable and profitable prices In order to establish a sustainable and p ...
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