Besides basing pricing decisions on Economic considerations emphasis has also

Besides basing pricing decisions on economic

This preview shows page 73 - 76 out of 203 pages.

Besides basing pricing decisions on Economic considerations, emphasis has also to be laid on Marketing and Cost issues. Marketing issues are external in nature. This means, these issues are influenced by factors existing in the environment outside the organization. Whereas Cost issues are internal in nature, which means they are very much dependant on the organizations internal issues. We must however remember that no decision on pricing can be done on the basis of any one factor: It has to have a bearing on all the 3 issues. Viz- the Economic Scenario. The Market Environment and. The Cost Consideration. 4 percent 66.7 percent 36.4 percent 25 percent 19 percent 15.4 percent 5 percent 100 percent 50 percent 33.3 percent 25 percent 20 percent 6 percent 150 percent 66.7 percent 42.9 percent 31.6 percent 25 percent 7 percent 233.3 percent 87.5 percent 53.8 percent 38.9 percent 30.4 percent 8 percent 114.3 percent 66.7 percent 47.1 percent 36.4 percent 9 percent 150 percent 81.8 percent 56.3 percent 42.9 percent 73
Image of page 73
PRICING Market Based Pricing We shall view here some of the marketing considerations that can influence our pricing decisions: 1. Going Rate Pricing for ‘me-too’ Products Where a company is introducing a new product, which is not a totally new concept but rather is a copy of some other existing product, then it is an instance of a 'me-too' product. Example can be ITC introducing, biscuits, soaps or snack foods. In such cases the new entrant has to decide on a pricing strategy keeping in view 2 parameters viz comparative price and comparative quality. From the above table you can see, there are 4 possible combinations, and of these there are 2 options which are workable. (a). Premium price, which means offering a comparatively high quality product at a comparatively high price. It may work. Similarly one can offer (b). a cheap price product, which means offering a lower price product which may be of a slightly lower quality. However lower quality cannot be at the cost of compromising on the basic utility of the products viz. the function that it is supposed to perform. Thus if a ‘me-too’ product is being launched in bathing soap category, the new introduction must fulfill the basic function of a soap. Viz, it must clean the skin, be acceptable on the skin and not create any rash or other unpleasant sensation. But where it can be lower in quality may be in terms of fragrance, packaging, moisturising effect etc. The other two options viz. 'Superb value' and 'non workable' cannot work. Superb value cannot work because in the long run the marketer will unnecessarily be giving costlier material at lower price, leading to losses. Price High Low Quality High Premium Superb value Low Non-Workable Cheap 74
Image of page 74
PRICING Better quality will come at an increasing cost, and hence a business model of offering a costlier item at a lower price may not be sustainable in the long run.
Image of page 75
Image of page 76

You've reached the end of your free preview.

Want to read all 203 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors