Marketing Price

Tian Yun

Introduction to Marketing

April 2. 2015

Pricing Strategy

     In life, prices have a direct impact on customers’ behaviors because a small percentage change in price can affect many people’s decisions. For companies, prices have a direct impact on a firm’s bottom line; a small percentage improvement in price can generate a large percentage increase in profitability (Armstrong, Kotler). Therefore, setting the prices of products is important in marketing, and pricing strategy has significant effect on companies’ future.

     As we know the major pricing strategy include customer value-based pricing, cost-based pricing, and competition-based pricing. Customer value-based pricing is setting price based on buyer’s perceptions of value rather than on the seller’s cost. This strategy focus on buyer’s buying’s ability and perceptions, so the price is considered along with all other marketing mix variables before the marketing program is set. On the one hand, in the marketing has other pricing strategy, cost-based pricing, this strategy considers setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk (Armstrong, Kotler). The cost decides products’ prices so if the companies could purchase cheaper materials to produce products or improve their core technology to use less materials to produce products, they will have the big advantage in marketing. On the other hand, competition-based pricing strategy is also important. Competition-based pricing strategy is setting prices based on competitors’ strategies, prices, costs, and market offerings (Armstrong, Kotler). This strategy gives customers more opportunities to choose the products in the market. Consumer can compare all products’ value on the prices, which producers charge for similar products. As a result, competition-based pricing strategy will give the producers more pressures, but customers have a good chance to choose a reasonable price of products. Those three strategies have their own features, which means customer value-based pricing, cost-based pricing, and competition-based pricing are useful in market. Also, these three strategies are appropriate for the target market; the point is different type of companies should adjust their strategies to fit in the product life-cycle. No one strategy is perfect and fit in all situation if have one, all people could become a successful businessmen/women, all people could success, which means no people win. However, sometimes some strategies in the special situation could be the worst strategy.