Mataracy
VIP Contributor
As a professional marketers one need to know how to achieve pricing.
Generally, clear objectives must exist and price must be tailored to achieve those objectives. The optimal dynamic pricing guide for new products is that path that fulfils the firm's objectives over the firm's time horizon.
Thus,if the firm's objectives is to maximize the short-run contribution to overheads and profits, it should choose the mark-up with reference to the price elasticity of demand faced by the products.on the other hand,if the firm's objectives is to maximize long-term profitability by pursuit of a short-run limit pricing or sales maximization objective,it should ensure that the price level in each period fulfils the objective.
Other pricing guides include:
Consideration of pruce-volume relationships (elasticities of demand) to determine what happens to total revenue at various prices.
Comparison of those price- volume relationships and incremental costs to determine the most profitable price on each item.
Estimation of the contribution to overhead and profits on each product that can be produced with available facilities .
Flexibility of prices over time to meet changing market and cost conditions, unless there are strong argument against flexibility such as possible retaliation high costs of changing decision etc.
Consideration of the impact of price changes in the "image" of the company in the market in customer goodwill, and on the firm's reputation for "for" prices.
Consideration of the impact that price changes on one commodity may have on the sales of other items.
Experimentation of the impact that price changes, when this is not too costly to determine customers' reactions.
Determination of how much customers will benefit from price reductions from this will give some clues as to the response to price changes.
Consideration of competitors' reactions of price changes.
Evaluation of the impact of price changes on the entry or exit of competitors.
Coordination if price policies with other marketing policies,so that these are consistent and complementary.
Avoidance of overestimating how much can be accomplished by pricing alone ; as it is only one phase of management and cannot guarantee profitable operations.
Generally, clear objectives must exist and price must be tailored to achieve those objectives. The optimal dynamic pricing guide for new products is that path that fulfils the firm's objectives over the firm's time horizon.
Thus,if the firm's objectives is to maximize the short-run contribution to overheads and profits, it should choose the mark-up with reference to the price elasticity of demand faced by the products.on the other hand,if the firm's objectives is to maximize long-term profitability by pursuit of a short-run limit pricing or sales maximization objective,it should ensure that the price level in each period fulfils the objective.
Other pricing guides include:
Consideration of pruce-volume relationships (elasticities of demand) to determine what happens to total revenue at various prices.
Comparison of those price- volume relationships and incremental costs to determine the most profitable price on each item.
Estimation of the contribution to overhead and profits on each product that can be produced with available facilities .
Flexibility of prices over time to meet changing market and cost conditions, unless there are strong argument against flexibility such as possible retaliation high costs of changing decision etc.
Consideration of the impact of price changes in the "image" of the company in the market in customer goodwill, and on the firm's reputation for "for" prices.
Consideration of the impact that price changes on one commodity may have on the sales of other items.
Experimentation of the impact that price changes, when this is not too costly to determine customers' reactions.
Determination of how much customers will benefit from price reductions from this will give some clues as to the response to price changes.
Consideration of competitors' reactions of price changes.
Evaluation of the impact of price changes on the entry or exit of competitors.
Coordination if price policies with other marketing policies,so that these are consistent and complementary.
Avoidance of overestimating how much can be accomplished by pricing alone ; as it is only one phase of management and cannot guarantee profitable operations.
