Often the best strategy is not to charge the lowest price but rather to

Often the best strategy is not to charge the lowest

This preview shows page 32 - 33 out of 53 pages.

Often, the best strategy is not to charge the lowest price but rather to differentiate the marketing offer to make it worth a higher price. Some marketers even position their products on high prices, featuring high prices as part of their product’s allure. Management must decide who within the organization should set prices. Companies handle pricing in a variety of ways. In small companies, prices are often set by top management rather than by the marketing or sales departments. In large companies, pricing is typically handled by divisional or product line managers. In industrial markets, salespeople may be allowed to negotiate with customers within certain price ranges. Pricing in different markets- economists recognize four types of markets; - pure competition , the market consists of many buyers and sellers trading in a uniform commodity. No single buyer or seller has much effect on the going market price. In a purely competitive market, marketing research, product development, pricing, advertising, and sales promotion play little or no role. Thus, sellers in these markets do not spend much time on marketing strategy. - monopolistic competition , the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers. Sellers try to develop differentiated offers for different customer segments and, in addition to price, freely use branding, advertising, and personal selling to set their offers apart. - oligopolistic competition , the market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategies. Because there are few sellers, each seller is alert and responsive to competitors’ pricing strategies and moves. -p ure monopoly , the market consists of one seller. The seller may be a government monopoly, a private regulated monopoly, or a private nonregulated monopoly. Pricing is handled differently in each case. E ach price the company might charge will lead to a different level of demand. The relationship between the price charged and the resulting demand level is shown in the demand curve- a curve that shows the number of units the market will buy in a given time period, at different prices that might be charged. <- demand curve. Price elasticity of demand; price elasticity shows how responsive demand will be to a change in price. If demand hardly changes with a small change in price, we say demand is inelastic . If demand changes greatly, we say the demand is elastic . Economic conditions can have a strong impact on the firm’s pricing strategies. Economic factors such as a boom or a recession, inflation, and interest rates affect pricing decisions because they affect consumer spending, consumer perceptions of the product’s price and value, and the company’s costs of producing and selling a product. Rather than cut prices, marketers can instead shift their focus to more affordable items in their product mixes. Another approach is to hold steady on price but redefine the “value” in value
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