Pricing is often one of the most difficult things to get right in business. The intensity of rivalry between existing competitors in a market or industry depends on a number of factors. Product Cost: The most important factor affecting the price of a … Pricing is often one of the most difficult things to get right in business. There are three main approaches a business takes to setting price:Cost-based pricing: price is determined by adding a profit element on top of the cost of making the product. Factors Affecting Pricing Decisions (Top 5 Factors): Price is the only element of marketing mix that helps in generating income. Competitors – a huge impact on pricing decisions. One strategy is to ignore market share and try to work out the price for profit maximisation. Fair pricing. In 750-1,000 words, analyze the pricing strategies and discuss the following: 1. Product Cost 2. The value is determined through market testing and a price is set based on this value. Businesses who use ethical pricing strategies to sell their products and earn a profit are far more respected than those that hurt and defraud competitors or even consumers. We learned that cost plus and competitive pricing can be useful, but they’re fairly weak overall, particularly in the SaaS or software space. Pricing strategies. This paper examines factors that affect pricing decision for export markets, and sheds light on international pricing strategies in a global competitive market. Of the countries that regulate prices, 36% set the price of generic medicines at a … However, some external factors may be difficult to identify, particularly of the pace of change is very slow or is hidden from view. Pricing a product ethically is a major decision for any business. For instance, small businesses that do not have any employees average just $44,000 a year in annual revenue with two-thirds of these companies earning less than $25,000 per year. 2. The percentage markup on retail is determined by dividing the dollar markup by the retail price. Value pricing. It is important to be aware of these factors influencing intensity of competition, as it may influence the decision of entering a market or staying away of it. Pricing strategy is a way of finding a competitive price of a product or a service. There’s a number of value-based pricing strategies you can use including: Value pricing: this strategy is based on what customers think a product or service is worth, rather than actual costs. There are several factors a business needs to consider in setting a price: Remote learning solution for Lockdown 2021: Ready-to-use tutor2u Online Courses Learn more › Having a pricing objective isn’t enough. A firm also has to look at a myriad of other factors before setting its prices. Discuss the pricing decisions of generic drug manufacturers. Marketing Methods Used. Main factors affecting price determination of product are: 1. This cost includes both the variable and fixed costs. There are several factors a business needs to consider in setting a price. Respondents’ opinions were asked on a number of pricing strategies. Evaluate the impact competitors and additional economic factors have on the results of the generic drug pricing strategies. Internal Factors: 1. So far, we’ve already learned about cost plus pricing, competitor based pricing, and value based pricing in depth. Therefore, a marketer should adopt a well- planned approach for pricing decisions. These pricing strategies were derived from two studies that were conducted earlier. 1. According to the statistics, small variations in prices can raise or lower profitability by as much as 20-25%. Thus, while fixing the prices, the firm must be […] Evaluate the impact competitors and additional economic factors have on the results of the generic drug pricing strategies. However, revenue for small businesses can be scarce. Customers: Managers examine pricing problems through the eyes of their customers. Advantages of demand pricing include the ability to optimize prices using charts and mathematics that predict ideal prices. The broadest view of pricing comes at the industry price level, where managers must understand how supply, demand, costs, regulations, and other high-level factors interact and affect overall prices. Pricing strategies Remember there is a big difference between costs and price.Costs are the expenses of a firm. If it's not the highest number you calculate, something's wrong. Extent of Competition in the Market 4. Discuss the social and financial implications of generic drug pricing decisions for various groups of stakeholders. This should be your upper limit. Direct Competitor Pricing – Almost all marketing decisions, including pricing, will include an evaluation of competitors’ offerings. In addition to these, consider the other strategic factors and find the number that provides the best balance among them. Price is the amount customers are charged for items. That is certainly true for air cargo. product factors, market and environmental factors, as well as economic, political, social and cultural factors, have to be considered in the decision making process. The marketer should know the factors that influence the pricing decisions before setting the price of … This strategy is combined with the other marketing pricing strategies that are the 4P strategy (products, price, place and promotion) economic patterns, competition, market demand and finally product characteristic. A look at different pricing strategies a firm may use to try and increase profitability, market share and gain greater brand loyalty. Cost-oriented pricing strategies are developed with a focus on understanding cost basis and setting prices at a certain … Evaluate the impact competitors and additional economic factors have on the results of the generic drug pricing strategies. Among others, these may include procurement expenses, inventory costs, demand cannibalization between particular products, competitor prices, promo activities, and other factors. Government and Legal Regulations 5. Nevertheless, researchers generally concur that pricing strategies can be categorised into three groups: 1. cost-based pricing; What factors contribute to the advantages and disadvantages of various pricing strategies? Top 3 Pricing Strategies . Evaluate the impact competitors and additional economic factors have on the results of the generic drug pricing strategies. Pricing strategies in generic medicines Posted 01/10/2010 Eighty two per cent of countries impose pricing regulation while 18% opt for free market competition to control prices. No matter your cost, no matter the value, if people don't perceive it as fair, they won't buy. Analysis of competition will include pricing by direct competitors, related products, and primary products. A. The Pricing Strategy Matrix shows how different levels of price and quality combine to form four commonly used pricing strategies: Figure 1: The Pricing Strategy Matrix The Pricing Strategy Matrix discussed in this article is derived from a paper by Joel Dean titled " Pricing Policies for New Products ." Companies that excel at this level avoid unnecessary downward pressure on prices and often emerge as industry price leaders. ADVERTISEMENTS: The pricing decisions for a product are affected by internal and external factors. The additional products leads to a surplus, the surplus causes prices to fall once more, and the lower prices lead to an increase in demand, starting the cycle over again. The first one was a Delphi study among experts on most suitable monetary incentives to stimulate healthy eating (Reference Waterlander, Steenhuis and de Vet 24). In theory, this occurs at a price where MR=MC. Profit-oriented pricing strategies are developed with high margin or specific profit objectives in mind. Before we explore the pricing strategies on offer to your business, you should consider the seven following pricing tips raised by Leigh Cauldwell, behavioural economist and pricing expert, in the book The Psychology of Price: Pricing should be based on the value to the customer, not the cost to you. The dynamic software engine extends the basic formula outlined above adding a range of other pricing and non-pricing factors to be considered. Economic conditions directly impact supply and demand - factors at the heart of all pricing decisions, regardless of industry. How well is your airline using the following factors to set prices? The Utility and Demand 3. For example, if your markup is $20 and your product retails for $40, your percentage markup is: $20 / $40 = .50 or 50 percent. The carriers that learn to do this most effectively will have a distinct competitive advantage. In 750-1,000 words, analyze the pricing strategies and discuss the following: Discuss the pricing decisions of generic drug manufacturers. During the years, more and more attention has been paid to the process of establishing the price. Some external environmental factors such as economic conditions are reported daily in the media and managers have a wealth of information on which to develop strategic plans. Evaluate the impact competitors market structures and economic factors have on the results of the generic drug pricing strategies. To practice ethical pricing, you need to be able to spot the ethical issues that hinder fair pricing. Economic Conditions. Types of pricing strategies. Having a pricing objective isn’t enough. Cost: While fixing the prices of a product, the firm should consider the cost involved in producing the product. General strategies. Markup Pricing: The markup on cost can be calculated by adding a preset, often industry standard, profit margin percentage to the cost of the merchandise. Customer value-based pricing strategies: why companies resist Andreas Hinterhuber Introduction Pricing has a huge impact on profitability. Pricing strategies vary considerably across industries, countries and customers. Factors Influencing Pricing Decisions: Among the many factors influencing the pricing decisions, the three major influences are customers, competitors and costs. A firm also has to look at a myriad of other factors before setting its prices. Pricing Objectives 6. 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