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Pricing Strategy

One of the four major elements of the marketing is price. Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion.

While there is no single recipe to determine pricing, the following is a general sequence of steps that might be followed for developing the pricing of a product:

1. Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning.
2. Make marketing mix - define the product, distribution, and promotional tactics.
3. Estimate the demand curve - understand how quantity demanded varies with price.
4. Calculate cost - include fixed and variable costs associated with the product.
5. Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc.
6. Set pricing objectives - for example, maximization, revenue maximization, or price stabilization (status quo).
7. Determine pricing - using information collected in the above steps, select a pricing , develop the pricing structure, and define discounts.

These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the above list serves to present a starting framework.

the product is developed, the marketing strategy is formulated, including target market selection and product positioning. There usually is a tradeoff between product quality and price, so price is an important variable in positioning.

Because of inherent tradeoffs between marketing mix , pricing will depend on other product, distribution, and promotion decisions.