Price Strategy - Assignment Example

PRICING STRATEGY In marketing, pricing strategy is the concept that attempts to identify the most suitable amount for a product in a business. The concept revolves around other related concepts commonly known as the four Ps, which are the "product, place, price, and promotion." It also relates to the concepts of market demand, the competition, the product characteristics, and the economic patterns. As a marketing manager, one must consider the concepts as it determines all the sales and the profits made within a business.

The pricing strategy concept is one of the most critical components in marketing as it focuses on maximizing the profits and at the same time generates revenue for the business. For success in "pricing strategy," the marketing manager must understand how to heighten the concept by understanding the customers need the clarity on the market and understand the willingness to pay by the customers (Tanner Jr. & Raymond). Before a business determines the pricing strategy, it should first establish its objectives towards pricing and analyze the factors that may influence the optimum price placed on the product.

Once the manager establishes the objectives and the factors, then the pricing strategy will focus on achieving the objectives (Tanner Jr. & Raymond). In many cases, the life cycle, or the sage as to which the business is currently at determined how the strategy will be, this is because products often have different stages when it comes to how it will hit the markets. The "Mexican Taco Restaurant "needs to determine the break-even point as per its pricing strategy, for this to be achieved the break-even analysis must be computed.

The restaurants average order size of its customers is 7$ which is also the average order amount, the variable cost per order is 3$ while the fixed costs are 2000$ building lease, 500$ electricity and 3100$ for labor.Break-even point= fixed costs/ (average order price-average order cost) Average order size- 7$ per orderAverage order amount- 7$ per orderVariable cost per order- 3$Fixed costs- 2000$+ 500$+ 3100$ =5600$BP= fixed costs/ (unit selling price-variable costs).BP=5600/ (7-3)BP= 5600/4BP (number of meals) = 14001400 meals per month The company needs to sell 1400 meals per month in order to start making profits For the "Mexican taco restaurant to reach" the break-even point the manager should adapt to new strategies.

The first strategy is determining the price sensitivity, how sensitive is the price set for the product, is it high, or is its low. In determining the price sensitivity the marketing manager must understand that the higher the price the lower the volume, this strategy depend on how sensitive customers are in cases of price fluctuations, in cases where the customers are sensitive to higher prices then the marketing manager should lower the price so as to maintain the customers and also target new customers, this in turn ensures that the company meets its breakeven point (Tanner Jr.

& Raymond). Another factor that may lead to the low per month meals is competitiveness, in this the marketing manager analyzes the competitors price. This strategy determines what cost the manager places for the product, analyzing the competitors price looks indirectly and directly into the range at which the competitor sells the product that in turn helps the marketing manager determine the price at which he or she will sell his or her productReferencesTanner Jr., J., & Raymond, M. (n.d.).

Principles of Marketing. Retrieved June 13, 2015, from http://catalog.flatworldknowledge.com/bookhub/2030?e=fwk-133234-ch15_s03