These include geographical pricing, price discounts and allowances, promotional pricing strategies, discriminatory pricing and product mix pricing. A product line refers to a unique product category or product brand a company offers. In other words the value exchanged for use of the benefits of a certain product or service by the. Pricing can be defined as a process of determining the value that is received by an organization in exchange of its products or services.
Product decisions or policy and strategy are concerned with the management of the products product portfolio and brand management. Pricing strategy is beneficial in terms of diverse purchasing behavior of various customers. For example, patanjali deals in different categories of products which include shampoo, flour, toothpaste, etc. Pricing decisions 120 if buyers focus only on a products selling price per purchase unit without considering reputation, they may end up purchasing from vendors that provide neither quality nor value. Product mix strategies price lining x is a special pricing technique that sets a limited number of prices for specific groups or lines of merchandise. Understand the factors that affect a firms pricing decisions. Pricing strategies, pricing strategy, what are strategies for. Decisions regarding the product, price, promotion and distribution channels are decisions on the elements of the marketing mix. Yield management is especia lly suitable in the case of time.
Using product bundle pricing, companies combine several products and offer the bundle at a reduced price. The overall product mix offering tends to be quite a strategic one as it pushes or restricts the brandfirm into competing in different parts of the marketplace. The product mix, also called product portfolio, is the set of all product lines and items that a company offers for sale. What are the factors influencing pricing decisions in a market. Marketing management pricing decision tutorialspoint. Byproduct pricing refers to setting a price for byproducts to make the main products price more competitive. Marketing mix decisions remain same as domestic market except the target market. Secondly, high degree of demand and uncertainty create more revenue. When a product is part of a product mix, the strategy for setting a products price often has to be changed. Factors affecting pricing decisions business study notes.
Optional product pricing involves setting prices for accessories or options sold with the main product. Pricing strategy helps to increase a companys product or service sales in selected market. Dec 11, 2017 the importance of pricing the price a business charges for its product or service is one of the most important business decision that management makes. Product definition a product service is the most important component of the marketing mix being the centre of focus as the offer to the market. The 5 product mix pricing strategies or situations are depicted in the table below. Therefore, the pricing decisions of an organization have a direct impact on its success. Pricing strategy has played an important role in consumer purchasing behavior and decision making process richard, 1985. Pricing strategy is a science that requires you to consider many factors if you want to maximize your profits. Costplus pricingsimply calculating your costs and adding a markup. Nothing can cause confusion and doubt in a business like pricing your products and services.
Marketing mix consists of 4ps product decisions, pricing decisions, promotion decisions, and place or distribution decisions. Pricing decision analysis the setting of a price for a product is one of the most important decisions and certainly one of the more complex. Purchase unit pu refers to the weight, volume, or container size in which a food is normally purchased. However, the price must generate enough revenues to cover costs in order for the product to be profitable. Aug 04, 2015 before going into the detail of factors affecting pricing decisions, lets discuss some of the basic concepts of pricing, which are also important to know. Marketing theory states clearly that price is one of the 5 p s product, positioning, place, promotion and price that contributes to the marketing mix in order to get potential customers attention, motivate them, and get them to buy products or services. Product mix decisions width, length, depth and consistency. Factors that affect pricing strategies for international. For international markets, pricing is one of the most important elements of marketing product mix, generates cash and determines a companys survival yaprak, 2001.
A customer always compares the companys prices with those of its competitors. The consistency of a product mix refers to how closely related are the companys product lines in terms of characteristics, production process, distribution channels to name just a few. In the marketing mix, price has its own place which determines a customers payment to acquire a product. Usually, the companys offer includes some form of customer service, of product support services. Each product within the structure forms a part of the product mix. A fairly limited range of a product mix means that the brand is often more of a niche player.
Product mix pricing strategies pricing the product mix. A change in price not only directly affects revenue but has major consequences on other decisions. Pricing decisions factors to consider when setting prices all profit organizations and many non profit organizations must set prices on their products or services. Product support services stage five of individual product decisions. International marketing decision your article library. Thus, when we have to decide the product mix pricing, we have to decide the effect on the overall pricing and the ripple it will create on multiple product lines. Marketing management pricing decision pricing is a process to determine what manufactures receive in exchange of the product.
Need to decide what position you want your product to be in. Five factors to consider when pricing products or services. In such situations, firms are on a lookout for prices that would maximize the total profits of the product mix as such. Product mix pricing strategies in marketing study lecture notes.
However, the product line is a subset of the product mix. Dec 26, 2017 pricing strategies and pricing decisions are one of the most difficult decisions faced by a marketer. An introduction to the subject of pricing strategy and an overview of some of the tools and theories available in connection with the determining of price of a product. Decisions on a productmix level product decisions at the productmix level tend to determine the width of a companys productmix. Competitive pricingsetting a price based on what the competition charges. Pdf price is a major parameter that affects company revenue significantly. Feb 25, 2016 an introduction to the subject of pricing strategy and an overview of some of the tools and theories available in connection with the determining of price of a product or a service. It includes decisions related to product development, product pricing, product distribution and product promotion.
Generally, pricing strategies include the following five strategies. A firm also has to look at a myriad of other factors before setting its prices. In essence, multiple product lines forms the complete product mix. Before turning to the product mix decisions, we first have to know what the product mix actually is. Pricing a product is one of the most important aspects of your marketing strategy. It can be argued that product decisions are probably the most crucial as the product is the very epitome of marketing planning. Companies use many different pricing strategies and price adjustments.
What should you consider when making pricing decisions. It is the result of the fact that producing products and services often generates byproducts. Costplus pricing, oddeven pricing, prestige pricing, price bundling, sealed bid pricing, goingrate pricing, and captive pricing are just a few of the strategies used. The money claimed against the offered product or service in the market is called price.
If price is lowered, for example, then sales is most likely to increase. Obviously, cost needs to be one of your first considerations when making pricing decisions. This can be a minor part of the product or a major part of the total offering. Implies a pathway through which the final products of manufacturers reach the end users. Pricing as an element of the marketing mix 5 pricing, on the other hand, is not primarily concerned with creating value. Price is a major parameter that affects company revenue significantly. Rather, it could be said to be the marketing activity involved with capturing, or harvesting, the value created by the other types of marketing activities. Marketing mix decision involves preparing marketing mix strategies for international market. Finally, the marketing plan is executed and the outputs of marketing efforts are monitored to adjust the marketing mix according to the market changes. Pricing depends on various factors like manufacturing cost, raw material. Understand why companies must conduct research before setting prices in international markets. Simply defined, price is the amount of money charged for a product or service. A companys price level sends signals about the quality of its products to the customer.
This is why this paper starts by presenting basic pricing concepts. Keep the following things in mind when you work with your controller services to set your own pricing strategy. The competitors also keep an eye on the price levels of a company. If the distribution channel is large, price of the product will be high and if the distribution channel is short, the price of the product will be low. Thus, these are the major factors that influence the pricing decisions. Some of the major factors influencing pricing decisions of a company are as follows. Introduction we need to set price when we have a new product, or when we enter a new market with an existing product how. This lesson on marketing strategy introduces the concept of pricing, which is one of the fundamental ps of a companys marketing mix. When the product is a part of product mix or portfolio, companies adopt five kinds of pricing strategies in marketing which are as under product line pricing this strategy is used for setting the price for entire product line. For example, the new system will result in more accurate product costs which will influence pricing and product mix decisions. Apr 08, 2020 a product mix is a group of everything a company sells. Jul 03, 2017 this lesson on marketing strategy introduces the concept of pricing, which is one of the fundamental ps of a companys marketing mix.
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