PRICING DECISION Introduction:Price is the one of the major variable of marketing mix, and the only one that

is considered as pure revenue generating. Price can be defined as a measure of the value exchanged by the buyer for the value of the product or services offered by the seller. But it cannot be considered purely independently, but must be related to the rest of the mix. Price versus non-price competition: Price competition: a policy where by a firm focuses on price as a means of differentiating its products from others and attempts to match or beat its competitors prices. A company using price competition must be willing and able to change prices frequently and should be the low-cost producer of the product. Non-price competition: a policy in which a seller focuses on aspects other than price-such as distinctive product features, service, product quality, promotion and packaging to differentiate its products from competing brands. When using non price competition, firms focus on aspects of the product that offer value to the target market.

Pricing objectives: Before a firm can determine the right price for a product, it must determine the role of price in the marketing mix. A pricing objective is a general goal that describes what an organization hopes to achieve through its pricing activities. It should be measurable so that they can be evaluated. Survival is the broadest and most fundamental pricing objective. Beyond this there are three major categories of pricing objectives:1. Status quo objectives: some organizations are satisfied with their current market position

and sales. In such cases, status quo objectives can focus on several dimensions-meeting competitors prices, achieving price stability or maintaining favorable public image. By following this objective, a firm can stabilize demand for its products. This in turn reduces the firm risk.
2. Profit objective: most of the firms establish the profit motive of maximizing profits. The

major problem with this specific objective is that it is difficult to measure whether profit maximization has been achieved or not. Therefore, these objectives are generally set at levels that top level decision makers view as satisfactory.
3. Sales objectives: the pricing objective of some companies is to increase sales volume. This

objective is expressed as a percentage of sales over a specified time period for e.g.:- a

firms pricing objective might be to boost sales by 10% over a one year. Another sales objective relates to market share, which is a firms sale in relation to total industry sales.

Factors influencing pricing decisions Price cannot be considered in isolation. There is a range of factors that can influence the price that can be charged for a particular product or service. Therefore, it is important to consider these factors.
1. Cost: the first and major factor is the cost. The price charged must ensure all costs are

recovered. Calculating the total cost may not be easy and a careful watch must be kept on the cost of nay product as costs will change over time. Like raw materials might rise in price and it is necessary to consider these changes in the price charged.
2. Government policy: when considering the pricing of a product the company must be

mindful of the additionals. These are costs added when the bill is finally presented to the customer. It includes local taxes, service charge, surcharges etc.
3. Competition: it is another factor that influences the prices that can be charged for a

product or service. Customers perceive many products as very similar so they expect the price to reflect that similarity. While any organization tries to differentiate its products from its competitors but it is not always possible to do so.
4. Consumer tastes and preferences: Individuals tastes and preferences often reflect the

price people will pay for a product or service. For example: collectors of fine art are usually pays the high price similarly, individuals will pay high price for limited edition items like records and CDs etc.

Pricing strategy: New product pricing: the pricing of new product is one of the most fundamental parts of the marketing mix. Price skimming and price penetration are pricing strategies for new product.
1. Price skimming: it is setting the highest possible price that buyers will pay. It is a policy

aimed at consumers who are concerned more about quality or status that about price. Price skimming affords the most flexibility in pricing a new product because it is easier to lower a high price than to raise a low price.
2. Price penetration: it is getting a price lower than prices of competing brands to gain

access to a market and generate a larger unit sales volume. Penetration pricing is sometimes used by organizations to gain a larger market share quickly for new product.

This policy is less flexible than price skimming because it is more difficult to raise a penetration price than to lower a skimming price. Promotional pricing: price is often coordinated with another element of marketing mix i.e. promotion. The two variables are so interrelated that the pricing policy sometimes becomes promotional oriented.
1. Special event pricing: it is a form of promotional pricing that involves coordinating price

cuts with advertisements for seasonal or special situations to increase revenue or reduce costs. Special event pricing requires coordination of production, scheduling, storage and physical distribution to ensure that consumers can find promoted products on store shelves.
2. Price leaders: when a retailer sold a product below its usual profit margin or even below

cost is called a price leader. Retailers sometimes use price leaders to attract customers to the store in the hope that sales of regularly purchased merchandise will rise and increase sales volumes and profits. Psychological pricing: a pricing policy designed to encourage purchases that are based on emotion rather that rational responses. It is used most often at the retail level and is seldom used for organizational products.
1. Prestige pricing: it involves setting prices artificially high to imply a prestigious or quality

image. Prestige pricing is appropriate when consumers associate a higher price with higher quality. To be successful, prestige pricing must be supported by a strong brand image and a promotional program that reinforces this image.
2. Odd-even pricing: it is policy of ending a price with certain number in an effort to

influence consumers perceptions of the price of a product. Odd pricing assumes that consumers will buy more of a product at $9.99 than at $10. Some marketers believe that certain types of customers are more attracted by odd prices than by even ones. But some marketers might employ an even price in the hope that the consumers will perceive the product as being a high-quality, premium brand.