Pricing Strategy, Essay Example

Factors that will have impacts on pricing of the products

Kerin et al (2011), argues that the main factors that are most likely to impact on the pricing of new products in the market include

1. The type of competitive market be it pure monopoly, monopolistic competition, oligopoly or pure competition.
2. The main pricing objectives of the firm and the constraints the firm introducing the products into the market is facing.
3. The expected demand and supply estimated effects.
4. The revenue or streams of cash flow expected form the products.

However Kerin et al, (2011, ch 13), goes on to state that even though products can be managed through modification of the products, repositioning of the products or by modifying the market, it is imp3erative for the firm to know that pricing is the only factor that will contribute to the success of their products or brand.

Pricing  methods

According to Kerin et al, (2011, ch 13),Various pricing strategies can be used to price a product, but the main methods or strategies that can be used for new products includes skimming, prestige, penetration, bundle, cost-plus, standard markup , target return on investment, loss leader, if these methods are used the an approximate price level can be selected by the firm

The Standard Markup Approach is lauded as the best method for pricing a products as it reflects the selected target market, the strength of the company’s location, the nature of completion the products is challenging and the company’s cost structure. It is also important for a price strategist to know that reflecting the price sensitivity of the target market as well as the type of services or goods the company id offering is also important.

It is also very important to note that the standard mark up approach also has its shortcomings that should be taken into consideration, the main limitation is that does not take into consideration the unique nature of competition or the market as it is based on the cost and not the market conditions (Kerin et al, 2011, ch, 14),

The standard markup method has two major shortcomings:  It fails to take into consideration either the unique nature of the market or competition, or both. The standard markup approach is based on costs rather than market conditions. It also assumes that the competitors are using the same approach and customers are ready to purchase the products at the market prices

References

Kerin R, Hartley S, and Rudelius (2011): Marketing, Tenth (10th) EditionMcGraw-Hill,