Pricing Decision Is Made By The Company Marketing Essay

Published Date: 23 Mar 2015

Pricing decision is the decision that has to make by a company to make sure the price that decided is accurate or not. Competition is one of factors that have to consider by a company when a company make a pricing decision. Competition is a very important for a company so that they know the strategic, costs, market offerings or price of competitor's company at the same time.

In the other hand, the pricing decision that considered by a company will affect the nature of the competition. Competition varies during the product life cycle, of course, and so at times it may strongly affect pricing decisions (McDaniel/ Lamb/ Hair-Introduction to Marketing). The product line cycle is the process that started from introductory stages, growth stages, maturity stages, and finally is decline stages. A company should make pricing decision when the introductory stage because a company should promote their product at which price whether at lower price or higher price that compare with the competitor. A company mostly will decide to promote their product at lower price that compare to competitors because a company has to get the market share from their product and to attract the customers' attention to buy their products. Once the customers feel delight with the products, they will promote the products to their relatives or friends about the products.

A company also has to consider the competition as an important factor because the customers will also compare the price between the company and other companies. A company should do a market survey or research before they start to sell their products because the customers will always compare the price between each others. For example, since that The Mines and Tesco is the competitor on each other therefore when customers will always compare the price of both shopping complexes at the same times when they want to buy some products. If the customers feel the price of The Mines is lower than Tesco, so the customers will often go to The Mines to purchase the products and seldom go to Tesco to purchase the products that they wants.

Competition is also the factor that happened in the global marketplace that often forces the companies cut down their product prices to gain their market shares from the customers. For example, Carrefour which is one of the largest shopping complexes in the world has to cut down the price for their products to increase their market share from the customers.

In accessing competitors' pricing strategies, the company should ask several questions (Amstrong, G. & Kotler, P. (2011). Marketing: An Introduction 10th Edition) . The company will charges the higher price for the product which can brings a greater value while the companies will charges the lower price to the products which provide a less value but they can choose whether charges with lower prices or changes to higher prices. Besides that, a company makes a pricing decision based on whether the competitors are stronger or weakness compare with a company. Other than that, a company also makes the pricing decision based on the ways for a competitive landscape influence customer's price sensitivity. For example, a customer will be sensitive on price when he or she find that a little of difference between the company product and competitor's product. Other than that, a company must set the superior price on their products to get more market share from customers.

Consumer Perception of Price and Value

Besides the competition, the consumer perception of price and value also become a factor that a company to consider during the process of pricing decision. A company should always consider the customers' perception because the customers will bring a lot of business for a company.

A company can know the customers' perception from product positioning. Product positioning-which is the sixth and final step in the market segmentation process-involves developing a product and marketing plan that will appeal to the selected market segment (The Portable MBA in Marketing,Alexander Hiam and Charles D. Schewe). A company should bring out and sells the products to the market segmentation that a company decides to serve during the product positioning process. A company can decide the market segment by product positioning which a company should consider the customers' demographic, geographic, and behavior characteristics. After the company decides the market segmentation, the company can make the pricing decision more accurately. For example, if a company decides the rich people as the market segmentation, so the company will set the price of their products by higher prices that other competitor. From a survey show that customers like products which have higher or better quality at higher price compare than other competitor. If the customers have the same the perception which is more higher price of a product, more higher quality of the product, so a company will set a higher prices during the pricing decision process. A company should make pricing decision based on customers perception so that the price that set in market can accepted by customers

A company will begins a good pricing with a complete understanding of the value and price of the products or services from the price setting to capture the customers' perception on value and price. For example, if a customer decides to buy a product but he or she find that the price that set is higher the value which is from a products, this will make the customer making decision that does not buy this product. A company can make the decision on pricing based on two types of value basing pricing which are good- value pricing and value-added pricing. A good-value pricing means a company will sets a fair price by offering the right combination of quality and good service. Besides that, value-added pricing means a company will sets the prices based on customers' perceptions of product value rather than the manufacture's cost.

Other than that, the customers' perception on value and price will set the ceiling of price; costs also will set the floor for the price that a company can set. A company needs to know the costs that spend on products before they can decide the pricing decision by using cost-based pricing (Amstrong, G. & Kotler, P. (2011). Marketing: An Introduction 10th Edition). Cost-based pricing is a stage that a company set prices that including the producing expenses, distributing expenses, selling expenses and the value of return on effort and risk. A company should consider the cost-based pricing as the important stage in pricing strategies. The costs that spend on products can be two forms which are fixed costs and variable costs. Fixed costs are the costs that do not easily vary with production level while variable costs are the costs that vary directly with the production level. Examples of fixed costs are bills for rent, interest or executive salaries while the examples of variable costs are bills of electricity, packaging expenses and so on. The company must calculate the costs of products carefully. If the company costs are higher than other competitor's costs during the producing and selling the products, this will make the company set the higher prices to earn some profits. The effects of charging the higher prices of products, the customers will buy the products from other competitors because the price that offers by the competitor is cheaper than the company. Therefore, a company should consider the customers' perception on value and prices as important elements because customers can determine company performances.

Organizational Considerations

Organizational considerations also the important element when pricing decision is make. An organizational consideration is the internal factors that can affect the pricing decisions. Organizational considerations mean the pricing decisions in different companies are set by different people or departmental. For example, in small companies, the pricing decisions are made by the top management compare than in large companies, the pricing decisions are made by divisional or product line managers and not the top management (Amstrong, G. & Kotler, P. (2011). Marketing: An Introduction 10th Edition).

Before a company makes the pricing decision, a company must understand the relationship between price and quantity that demand from customers for the products. The price and demand of the products are the elements that need by a company to make an accurate decision or set an accurate price of products in the market. The relationship between the price that a company set and the demand of the products are negatively. This means that when the price is set higher, the demand of the products will become decrease while when a company set the price at low price, the demand of the products will become increase. Therefore, a company should set the low price or superior price to increase the demand of the product; this also will increase the profit for a company.

When a company wants to produce and sell the products, a company will do the survey on market segmentation to know whether the products are available to sell or not. A company also can know the demand from customers of the products from market demand curve. From the demand curve, a company can know the difference of the quantity of the products if the price is increasing or decreasing. This curve is useful for company to make the accurate pricing decision. If the company makes the accurate pricing decision, the customers will become more and more and the profit of a company also will increase from one time to other time. This factor also helps the performance of company become systematic because a company must have a department to make pricing decision. If there is no organizational consideration in a company, the performance of a company will faces loss of profit and many pricing decision are make because there is no department is decide to make pricing decisions.