PRICING TACTICS IN MARKETING

Pricing is one of the four pillars of marketing, along with product development, positioning and place of sale. Any businessman can use temporary discounts or permanent price reductions as part of its marketing strategy with different risk/reward levels. Depending on its competition and target customer, price-cutting can help the businessman increase sales volumes and profits, or damage its company’s brand and make it less competitive.

IMPORTANCE OF PRICING

Setting the right pricing is one of the important P’s of the marketing mix. Of the “Four P's” taught to every freshman marketing student, "pricing" is considered as important as any of the others. The price a businessman set not only affects its business sales volumes and profits, but also the brand image of its company as well. Pricing is so important that some manufacturers set specific limits on what retailers can sell their products for, including both the high and low selling price. Small-business owners use temporary price discounts as short-term tactics to go along with long-term pricing strategies.

 

PERCEIVED VALUE

The price a businessman sets for its product sends a message to consumers about its worth, creating a perceived value for its products or services. Selling product at prices lower than the competition tells consumers who buy based on value and affordability that it is a bargain. Low prices can create a negative feeling in the mind of high-end shoppers. High prices might send a message that the company offer superior quality because of the product’s features, the customer service it offers or both.

Pricing is a very powerful weapon in marketing, but there are many different ways to use it to help achieve marketing objectives. It is important to make a distinction between pricing strategies and pricing tactics

PRICING STRATEGIES

These are adopted over the medium to long term to achieve marketing objectives They have a significant impact on marketing strategy.

PRICING TACTICS

These are adopted in the short run to suit particular situations Tactics have only limited impact beyond short-term sales of the product itself. 

It may also be that the pricing strategies a business can implement are constrained by the competitive position of the business.

It is often said that there are four categories of position a business can find itself in which influence the control it has over pricing:

1) Price taker

Here, a business has no option but to charge the ruling market price.

(2) Price maker

For a price maker, the business has a strong enough competitive position to be able to fix its own price – either higher or lower than the competition.

(3) Price leader

A price leader is often a market leader whose market share is so strong that its price changes are closely followed (and often copied) by rivals

(4) Price follower

A business that just follows the price-changing lead of the market leader (ignoring the rest of the competition)