Pricing  strategy is  the  tactic  that  company  use  to  increase  sales  and  maximising  profits  by  selling  their  goods  and  services  for  appropriate prices. It is the policy a firm adopts to determine what it will charge for its  products and services. Marketing’s  four Ps – product, price, promotion and placement – the basic components of any marketing mix. The decisions you make with regard to all of these elements  can  mean the difference between  success and  failure.  There are many factors that will have  an influence on how you set the price for your product or service, with some of them internal and some external ,  and most of them will fluctuate over time.

4 P's of Marketing Mix

 

INTERNAL FACTORS

1. Cost :
While fixing  the  price  of  a  product,  the  cost  involved in producing the product.  This cost  includes  both  the variable and  fixed  costs.   Thus, while fixing  the prices,  the firm must  be able to  recover both  the  variable and  fixing  costs.
2. THE PREDETETMINED OBJECTIVES :
While fixing the prices of the product, the marketer should considers the  objectives  of  the  firm.  For instance, if the objectives of a firm is to increase return on investment, then it may charge a higher price, and if the objective is to capture a large market share, then it may charge a lower price.
3. IMAGE OF THE FIRM :
The  price of the product may  also  be  determined  on the  basis  of  the  image of the firm in the  market.
4. PRODUCT LIFE CYCLE :
The stage at which the product is in its product life cycle also affects its price. For instance, during the introductory stage the firm may charge lower price to attract the customers, and during the growth stage, a firm may increase the price.
5. CREDIT PERIOD OFFERED :
The pricing of the product is also affected by the credit period offered by the company. Longer the credit period, higher may be the price, and short the credit period, lower may be the price of the product.
6. PROMOTIONAL ACTIVITY :
The promotional activity undertaken by the film also determines the price. If the firm incurs heavy advertising and sales promotion costs, then the pricing product shall be kept high on order to recover the cost.

 

EXTERNAL FACTORS

1. COMPETITION :
While fixing the price of the product, the firm needs to study the degree of competition in the market. If there is high competition, the prices may be kept low to effectively face the competition, and if competition is low, the prices may be kept high.
2. CONSUMERS :
The marketer should consider various consumer factors while fixing the prices. The consumers’ factor that must be considered includes the price sensitivity of the buyer, purchasing power, and so on.
3. GOVERNMENT CONTROL :
Government rule and regulation must be considered while fixing the price. In certain products, government may announce administered prices, and therefore the marketer has to consider such regulation while fixing the prices.
4. ECONOMIC CONDITIONS :
The marketer may also have to consider the economic condition prevailing in the market while fixing the prices.  At the time of recession, the consumer may have less money to spend, so the marketer may reduce.
5. CHANNEL INTERMEDIARIES :
The marketer must consider a near of channel intermediaries and their expectation.  The longer the chain of intermediaries, the higher would be the prices of the goods.

 

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Prepared by

Meera Michael

Faculty

Kairos Institute, Thodupuzha

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