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Pricing strategy and planning is complex and fraught with
uncertainties.
Company Objectives
As a starting point - lack of realism and precise
definition, inconsistent.
Establishing parameters
Upper and lower limits of price within which he can
maneuver.
Determining Factors
- Internal Factors
- Cost of the product. Should be aware of costs &
variations. Use of value engineering helps.
- Allocation of costs. via product and production line.
- Contribution profit v gross profit - both are relevant.
- Company image
- Risk taking
- External Factors
- Competition
- Number of manufacturers in sector
- Is there wide variation in price and does this
reflect in market shares
- Is sector fiercely competitive with low margins
or if not is there some agreement on price
- New product - high margin or low margin
- Consumer attitudes
- Degree of price elasticity
- Strength of brand loyalty
- Image
- Company's image has a bearing on price
expectations
- Inflation
- Has resulted in price being more and more the
key element in buying decisions
Selection and use of a pricing strategy
- Must decide on overall product strategy - which to
develop, maintain, let die.
- Select pricing stategy with above in mind.
- Ensure pricing strategy is not inconsistant with other key
elements of mix eg advertising, salesforce.
- Must not be afraid to initiate price changes.
- Must not be paniked into responding to every competitive
price change.
- Must be flexible and be prepared to experiment.
Pricing strategy demands comprehensive information feedback,
speed, inelligent response and efficient monitoring and control.
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