Marketing Essay

304 WordsMay 14, 20142 Pages
Despite the increased role of non-price factors in modern marketing, price remains a critical element of the marketing mix. Price is the only element that produces revenue; the others produce costs. In setting pricing policy, a company follows a six-step procedure. It selects its pricing objective. It estimates the demand curve, the probable quantities it will sell at each possible price. It estimates how its costs vary at different levels of output, at different levels of accumulated production experience and for differentiated marketing offers. It examines competitors’ costs, prices and offers. It selects a pricing method. It selects the final price. Companies do not usually set a single price, but rather a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels and other factors. Several price-adaptation strategies are available: (1) geographical pricing; (2) price discounts and allowances; (3) promotional pricing; and (4) discriminatory pricing. After developing pricing strategies, companies often face situations in which they need to change prices. A price decrease might be brought about by excess plant capacity, declining market share, a desire to dominate the market through lower costs or economic recession. A price increase might be brought about by cost inflation or over demand. Companies must carefully manage customer perceptions in raising prices. Companies must anticipate competitor price changes and prepare contingent responses. A number of responses are possible in terms of maintaining or changing price or quality. The company facing a competitor’s price change must try to understand the competitor’s intent and the likely duration of the change. Strategy often depends on whether a company is producing homogeneous or non-homogeneous products. A market leader attacked by

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