marketing pricing objectives

Penetration pricing is a pricing strategy whereby an organisation introduces its goods or services to consumers at a comparatively lower price than the existing market price. The fundamental objective of such an approach is attracting consumers to the product in the hope that the consumer will establish a fondness or a need for the product. As a consequence, organisations use this strategy as a means to ultimately gain a higher market share for a particular product or service. Once this has been achieved, organisations hope to increase the price. It is apparent that penetration pricing works on the assumption that price sensitive customers, also referred to as ‘cherry pickers’ (Kalish, 1985), switch brands when prices for substitutable products are lower.

One of the most important concepts of economics is supply and demand, which is the chief support of a market economy. The relationship between these two factors assists in outline the allocation of resources in the most effective way possible. The demand of a product or service represents the quantity desired by buyers. In other words, demand is the quantity of a product or service that people are keen to purchase at a certain price. The law of demand affirm that, if all other factors don’t alter, the higher the price of a product, the less buyers will demand it.

INTRODUCTION: Price discrimination means charging a different pricing of same product, good and services by the same provider in different markets. It is a pricing strategy by which a producer charges its good and services at different pricing levels. Firms are selling their same goods at a market price in competitive market. So for price discrimination firm must have some market power. The first lesson is that price discrimination is a ration strategy for maximizing profit that is a monopolist can increase their profit by charging different pricing for different customers a monopolist can charge s a price to each customer according to their willingness to pay.

Price is defined as the quantity of payment for something. It shows price as an exchange ratio between goods that pay for each other. Price also related to the market the company’s planned value positioning of its product or brand. As well as their overall assessment of the retailer, price has gradually become a central point in consumers’ decisions of offer value. Price suggestively influences consumer choice and occurrence of purchase.

A price leadership is the practice in many oligopolistic industries in which the largest firm publishes its price list ahead of its competitors. Then these competitors feel the need to match those announced prices so they lower their prices. This is also termed a parallel pricing. Oligopolies tend to be broken down into one of two distinguished groups. These groups are either a homogeneous or differentiated oligopoly.

Second, resources sold must be perishable. Seats are a perishable items, if not sold they terminate without value. Third, the most vital portion of r... ... middle of paper ... ... demand as a function of marketing variables, such as price or promotion. These involve building specialized forecasts such as market response models or cross price elasticity estimates to predict customer behavior at certain price points. By combining these forecasts with calculated price sensitivities and price ratios, a Revenue Management System can then quantify these benefits and develop price optimization strategies to maximize revenue.

A rise in the price of this good leads to a rise in the quantity supplied shown by a movement along the supply curve. The change in supply can be caused by a change in production costs, technology and the price of other goods. At a lower price some firms will cut back on relatively unprofitable production whereas others will stop production altogether. The demand for a good will rise or fall if there are changes in factors such as incomes, the price of other goods, tastes, and the size of production. The demand curve shows effective demand, this means it shows how much would be bought by customers at any given price and not how much buyers would like to buy if they had unlimited resources.

An organization can use one or both of them over a calculated period of time. Price Skimming involves charging the highest price possible for a short time where a new, innovative, or much-improved product is launched onto a market. The objective with skimming is to “skim the cream” off customers who are willing to pay more to have the product sooner. Prices are lowered once demand falls. (Business, 8th Ed., pg 422) Penetration Pricing is the opposite extreme; it involves the setting of lower, rather than higher price for a new product.

Rather than cutting prices to match competitors, they attach a value-added features and services to differentiate their offers and thus support their higher prices (Kotler, p.293). The value added is the difference between the price of product or service and the cost of producing it. The price is determined by what customers are willing to pay based on their perceived value. Value is added or created in different ways. The best strategy is setting our pricing strategies would be to use skim pricing.

Laws of Supply and Demand The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve.