Summary of Chapter, Pricing Strategy Assignment Example | Topics and Well Written Essays - 500 words - 5

Summary of Chapter, Pricing Strategy - Assignment Example The percentage of profit that company deems fit is added to set the final cost. The cost price strategy becomes viable for product only when defined sale volumes are estimated and met through effective marketing. This is a flawed strategy as it relies on sales volumes and if they are not met, the cost goes up and adversely impacts the performance of the company. It also totally ignores the customers who are increasingly become the major part of business strategy and marketing. Competitor based pricing primarily believes in the price strategy of its main competitor and follows the same regardless of its repercussion on its profitability. This is wrong because each has its own constraints and inputs that need to be considered in the pricing strategy. It becomes fatal when the competitor’s strategy is based on selling the product irrespective of loss. The market-led strategy is best described by setting one’s pricing based on the pricing of its competitors. The pricing is either the same or lowered so that to gain market position. Sometimes, when value addition to the product provides it with unique features, firms can maintain their market position even when the price is raised. This is most prevalent in the contemporary environment of high competition. Glaxo’s Zantac had overtaken SmithKline Beecham’s Tagamet because it had fewer side effects in ulcer treatment. Thus, product pricing also influences customer’s perceived value of the product. Three techniques: tradeoff analysis; experimentation; and economic value to the customer or EVC are used for understanding customers’ perceived value of the products. The tradeoff analysis uses customer’s requirements for a product and adds or removes those properties within the product to make it attractive to the customers. Firms can raise the price despite heavy competition. Experimentation  tests the preferences of customers by placing the same product with varying prices at a different location.