pricing management:
Meaning of pricing:
Price is the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Price is the only element in the marketing mix that produces revenue, while all other elements represent costs. Price is also one of the most flexible element of the marketing mix. Unlike product features price can be changed quickly. At the same time, pricing and price-competition is the number one problem faced by many marketing executives.
price is a exchange value of goods and services in terms of money. Price is all around us. We pay rent for house, tuition fees for education, consultancy fees to a doctor, fare for taxi , wages to workers, salary to executive and money for goods we consume in our daily life. Thus, price has various forms. The term 'price' denotes money value of a product. It represents the amount of money for which a product can be exchanged. In other words, price represent the money which the buyer pays to the seller for a product.
Definition of Pricing:
Meaning of pricing:
Price is the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Price is the only element in the marketing mix that produces revenue, while all other elements represent costs. Price is also one of the most flexible element of the marketing mix. Unlike product features price can be changed quickly. At the same time, pricing and price-competition is the number one problem faced by many marketing executives.
price is a exchange value of goods and services in terms of money. Price is all around us. We pay rent for house, tuition fees for education, consultancy fees to a doctor, fare for taxi , wages to workers, salary to executive and money for goods we consume in our daily life. Thus, price has various forms. The term 'price' denotes money value of a product. It represents the amount of money for which a product can be exchanged. In other words, price represent the money which the buyer pays to the seller for a product.
Definition of Pricing:
"According to Prof. K.C. Kite," 'Pricing is a managerial task that involves establishing pricing objectives, identifying the factors governing the price, ascertaining their relevance and significance, determining the product value in monetary terms and formulation of price policies and the strategies, implementing them and controlling them for the best results'.
Pricing Objectives:
Pricing objectives provide basis for formulating pricing policies, pricing strategy and setting actual prices. The pricing objectives should be consistent with internal organisational atmosphere and compatible with the external environment. They should aim at achieving the firm's objectives. Pricing objectives of individual firms in an industry usually differ from each other depending upon the variations in their overall organisational goals.
1. Survival:
Survival is the most fundamental objectives in most of the cases. Most organisations will tolerate short-run losses, internal upheaval, and many other difficulties if these are necessary to continue existence. When the organisation/firm faces survival crises, pricing is used to increase sale volume to levels that the organisation's expenses. In other world, fix low prices for the products. However, survival objective is a short-term objective.
2. Target return on investment:
This is a common objective of well established and reputed firms in the market to fix a certain rate return on investment. The prices of the products are so calculated as to earn that rate of return on investment.Different target returns may be fixed for different products but such return should be related to a single overall rate of target return.
3. Profit Maximisation:
Profit maximisation is the age-old objective of pricing.The firm should aim at maximising profit on total output rather than on each product item. The monopoly situation or scarcity condition give chances for profit maximaisation. Profit maximaisation can be a long-term objective because, at the early stages of product life cycle, there is a need for building up minimum market share/sales volume which is possible with lower prices and lower margins.
4. Price stability:
Many firms have the objective of price stabilisation. It is a long-term objective. It is found in industries that have a price leader. Generally, in oligopolistic situation, one seller acts as the peice leader and other follow him. The price leader tries to maintain stability in his pricing.
5. Market share:
Market share is really a meaningful measure of the success of a firm's marketing strategy. Market share means that portion of the industry sale, which a firm desire to achieve. The firm may adopt this as an objective either to maintain or to improve the market share. When the market has a potential for growth, market share is a better indicator of firm's progress.
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3. Profit Maximisation:
Profit maximisation is the age-old objective of pricing.The firm should aim at maximising profit on total output rather than on each product item. The monopoly situation or scarcity condition give chances for profit maximaisation. Profit maximaisation can be a long-term objective because, at the early stages of product life cycle, there is a need for building up minimum market share/sales volume which is possible with lower prices and lower margins.
4. Price stability:
Many firms have the objective of price stabilisation. It is a long-term objective. It is found in industries that have a price leader. Generally, in oligopolistic situation, one seller acts as the peice leader and other follow him. The price leader tries to maintain stability in his pricing.
5. Market share:
Market share is really a meaningful measure of the success of a firm's marketing strategy. Market share means that portion of the industry sale, which a firm desire to achieve. The firm may adopt this as an objective either to maintain or to improve the market share. When the market has a potential for growth, market share is a better indicator of firm's progress.
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