Sunday, November 8, 2009

Pricing Strategy

Pricing is an important strategic issue because it is related to product position. Futhermore pricing effect other marketing mix element such as product features, channel decisions and promotion. The following are the steps that followed for developing the price of a new product.

1. Develop marketing strategy: it perform marketing analysis, segmentation, targeting and positioning.

2. Make marketing mix decisions: it define the producrt, distribution and promotional tactics.

3. Estimate the demand curve: it understand how quantity demanded varies with price.

4. Calculate cost: it includes fixed and variable costs associated with the product.

5. Environmental factors: it evaluate competitor actions and understand legal constrainsts.

6. Set pricing objectives: it includes current profit maximization, current revenue maximization, maximize profit margin, quality leadership and survival.

When any company is introducing a product to market they had to develop a price for that so they follow these steps. First they calculate their cost which associated with the product and then think about their competitor what price they are charging and what their mostly customer range is, after this they develop a price for a product which include their profit.