Although different companies select various pricing methods for their business, one general process is involved in establishing prices. The procedure includes eight steps: developing pricing objectives, the target market’s price evaluation, demand determination, analyzing demand, cost, and profit relationships, evaluation of competitors’ prices, selection of a pricing basis and strategy, specific price determination (Pride & Ferrell, 2016). The first step is ensuring that the set prices work according to the company’s general objectives and desired outcomes. Assessing the target market’ prices includes considering the kinds of prices that would be appropriate for different categories of products. Moreover, the quantity of a planned product release can be predicted by marketers by determining its product demand, a beneficial step in reducing production costs. Cost and profit relationships are analyzed by reviewing the costs and revenue of product sales and ultimately comparing the effects of increasing the revenue on the profit. An essential step of evaluating competitors’ prices allows a company to determine prices that are not too high or low for customers to choose the competing brand. Then, selecting the pricing basis and strategy involves the company prioritizing cost, demand, and competition as the basic elements while referring to either the price skimming or penetration strategies. Ultimately, the process of final price determination requires a thorough consideration of the financial and economic state of the current market.
Penetration pricing would be more effective for trending items, especially clothing and accessories, as the reduced prices would reinforce the rapid sales that occur with fashion trends. Moreover, internet and mobile companies could utilize the strategy to increase the number of potential clients through an introduction to cheaper multiuser plans. Marketers should be aware of competitive prices as it requires a precise analysis of customer purchases from competitors and the marketers’ company. At the same time, inaccurate analytics may cause severe profit loss and disadvantages against the competitors.
References
Pride, W. M., & Ferrell, O. C. (2016). Foundations of marketing. Cengage Learning.