Pricing Policies for a Competitive Edge

Describe some of the pricing policies that a company might adopt in order to gain a competitive edge

Give examples

Introduction

Price methods are procedures used by firms to determine the price of products a services based on internal costs and external market demand factors. 1

Of all the components that go to make up the marketing mix perhaps the most important is that of price. Its influence over revenue can potentially make or break a company depending on whether or not the price has been set correctly. The price of a product is designed to pay for all of the firm's expenses. However, its real attraction lies in the fact that it is probably the most flexible aspect of the marketing mix. This is because it can be altered rapidly in response to changes in the environment.

In this assignment we shall discuss not only the pricing policies a company or organization can employ but also their reasons for doing so. We shall also look at the various people to be considered in the pricing process.

Discussion

What is a price? Price goes under the guise of many names. It may change according to the traditions or interests of the seller. Sometimes the word is avoided altogether to make what is offered for sale, appear to be of a quality that price cannot describe. For example, a student pays "tuition" not a price for his/her education. 2 It is one of the prime determinants of sales revenue and can pay for all of a company's expenses. Its relation to the former can be stated in the following formula:

Sales revenue = price x unit sales volume 3

If the price of a product or service can be increased while the production or service delivery costs remain the same, revenues and profits will be increased.

Price is also important because it influences unit sales volume. Proper pricing should increase sales. It also adds a symbolic value to a good or service and helps to position a brand in relation to its...