The role of pricing is crucial for every marketing manager because it can hurt o

Question

The role of pricing is crucial for every marketing manager because it can hurt or determine the success of a business. There are three approaches that businesses use for setting pricing, cost-based pricing, customer-based pricing, and competition-based pricing. As stated by Finch (2012), “Marketers often think of the alternative pricing options available to them as bounded or constrained by three Cs: costs, customers, and competitors” (p. 10.1).

Cost-based pricing – is used to establish profit for a product. For example, at Airgas USA LLC if a customer does not return a cylinder, the customer is billed loss of use for the cylinder plus cost to establish a monetary profit. The text (Marketing Manager) defines cost-based pricing as “the reliance on an understanding of production- and marketing-related costs as the key elements in determining a product’s initial or standard price” (p. 10.1).

As stated by Finch (2012), “Customer-based pricing sometimes referred to as demand-driven or value-based pricing. It is a set of price-setting techniques that derive product prices from buyers’ perceptions of value rather than the seller’s cost. This approach includes price skimming and penetration pricing” (p. 10.1).

Marketing manager sometimes has a challenge in setting prices comparable to competitors. According to Finch (2012), “Competition-based pricing the process of making pricing decisions in response to the prices charged by competitors. Several types of company objectives are consistent with this approach” (p. 10.1).

Tide laundry detergent original scent (75 fl oz) sells for $10.17 at Walmart. Also at Walmart, Gain laundry detergent original scent (100 fl oz) sells for $9.25. Great pricing strategy here with Gain, offering 25% more detergent at a lesser price than Tide, excellent example of more for less in marketing. Both Tide and Gain detergents are good brands and pricing is a good marketing strategy to compete against competitors in the same market. Organizations have different pricing strategies for the same good or service to compete in the market amongst competitors. Different pricing also lure customers to the products.     I need a reply to this discussion

Explanation / Answer

There are different Pricing policies some of them listed below with brief description:

4. COMPETITION BASED PRICING: a company sets its prices by determining what other companies competing in the market charge.

In the case stated it is clear that it is competition based pricing and it is further discussed below:

Competition in the market can be divided into two category:

If there is strong competition in a market, customers are faced with a wide choice of who to buy from. They may buy from the cheapest provider or perhaps from the one which offers the best customer service. This results in competition and which in turn results in competition based pricing.

Competition-based pricing strategy involves setting your prices based on your competitors’ prices rather than on your own cost and profit objectives. After assessing its own product or service a company sets its prices higher than, lower than, or on par with the competitors. Markets with only a few competitors. In such a market, if one competitor lowers its price, the others will most likely lower theirs as well. For example, if a Company X sets its prices, then company Y can set the price same stating company Y products or services are superior in quality.

An advantage of using competitive pricing is that selling prices should be line with rivals, so price is not be a competitive disadvantage. The main disadvantage is that the business needs some other way to attract customers.

I hope your question is addressed satisfactorily.

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