The marketing mix is understood as a set of controlled parameters and variables marketing activities organizations, manipulating which it tries to best satisfy the needs of target markets. In other words, the marketing mix refers to “a set of controllable marketing variables.”
The most reasonable is the “4P” concept, according to which the marketing mix consists of four elements (tools), each of which English begins with the letter “P”: product, price, bringing the product to the consumer, to the place, promotion of the product. This concept was first proposed by Jerome McCarthy in 1960. In accordance with this concept, organizations, as part of their marketing activities, develop and implement product (commodity), pricing, sales and communication policies, which are reflected in the four main sections of the marketing plan. An organization can vary the parameters of the marketing mix in order to most effectively influence the market, consumers and achieve its goals within the framework of available capabilities and its understanding of the role of marketing. However, the structure of the marketing complex itself does not change; only the “filling” of its individual elements changes.
Price is the main element of the marketing mix, as it affects all components of the “4P” concept (see Fig. No. 2 in the appendix). Here it is necessary to clarify one point: if the market is price inelastic, then a change in the price factor will practically not change the amount of demand for a product or service (see Fig. No. 3 in the appendix). Therefore, in a market with inelastic demand, price fades into the background in the enterprise’s marketing system.
Price is a flexible marketing tool because prices can be quickly and easily changed based on demand, cost, or competition factors.
Due to the price elasticity of demand, price is one of the key
marketing tools. This happens for the following reasons:
1) Price changes greatly affect sales volume. Typically, a relatively low price will attract additional customers, but an unusually high price can have the same effect in some cases.
2) Changing the price, unlike any other marketing components, has the fastest effect. Price is the only marketing tool that is easily subject to change. To change the remaining three elements of the 4P concept, it is necessary to large number time and costs. The price can be easily edited to suit the changing conditions of competitors and consumers.
3) Potential consumers react faster to price changes than to changes in goods or services proposed to them. To see changes in the quality of a product, you need to buy or try it, while changes in price are immediately visible.
4) Changing the price in order to attract new customers is effective only in combination with promotional measures aimed at both resellers and potential clients. Price remains the main marketing tool only when interacting with other elements of the 4P concept.
All these reasons, with the correct determination of price, most significantly increase the sales volume of a product or service, which is the main result in the implementation of marketing policy. This in turn determines price as the main tool of the marketing mix.
When making a first purchase, the consumer cannot evaluate the quality of the product, and other things being equal, he will focus on price. As a rule, cheaper products are perceived by consumers as being of lower quality and vice versa. A high price gives a product or service a higher consumption status due to the limited number of consumers. Therefore, price acts as a separator in market segmentation.
A change in price will have a beneficial effect on sales only if it is set “correctly.” To do this, it is necessary to analyze competitors' prices, consumer capabilities, and many other factors. But in order to set the “correct” price, it is necessary to choose a pricing method that will reflect all costs, product features, market position, consumer desires, which in turn will determine the “correctness” of the price set for the product or service.
Price is the starting point for the consumer to choose a product or service. Typically, price is a more attractive factor than minor product features. Price change in short term influences the amount of demand and, accordingly, the volume of sales, so if an enterprise or organization wants to see quick and qualitative changes, then price is a key tool in the marketing mix
Price complex marketing tools– this is a set of all instruments related to the price of a product. This includes pricing policy, i.e. the actual price of the product, discount policy, terms of delivery and payment. Thus, we can say that the price complex is the general terms of the transaction.
Let's take a closer look.
1. Pricing policy determines what price is set for a particular product. Used three pricing methods- By costs(costs + profit margin), according to competitors, By consumers(what price they are willing to pay for the product). Pricing policy can be long-term or medium-term and should be considered from a strategic point of view.
2. Discount– reduction in price for certain (product-related) consumer actions. The discount policy assumes
- building a discount system– what discounts will be used (functional, discounts for a certain volume, for “loyalty” to the product, etc. The types of discounts will be described in more detail in the topic “Pricing Policy”)
- determining the discount amount
- determination of discount intervals(for example, a 5% discount is provided when purchasing a batch of goods from 100 to 200 units, a 10% discount - from 201 to 300, etc.)
3. Delivery terms include readiness for delivery, delivery time, conditions for delivery of goods, conditions for replacement and return of goods, cost of packaging, freight and insurance. Most these parameters are specified in the contract or in general conditions transactions, rules, etc.
4. Terms of payment regulate the method of payment (for example, payment in advance, in cash, after receiving the goods, in whole or in parts), security of payment, means of payment (bank transfer, letter of credit, etc.), as well as payment terms and discounts for paying in cash.
5. When payment terms increase, another tool of the pricing complex comes into play - credit policy, for the use of which you need to determine the conditions (interest) and terms of the loan. Credit policies are widely used, e.g. retail chains, selling household appliances.
3.1. Pricing policy and the role in the marketing activities of the enterprise
3.2. Methods for setting prices in an enterprise
Learning objectives:
o determine the essence of pricing policy and its role in the marketing activities of the enterprise;
o reveal main aspects of the formation of the enterprise's marketing pricing policy;
o characterize methods for setting prices in an enterprise.
Pricing policy and its role in the marketing activities of an enterprise
From a marketing point of view product price- this is an assessment of its consumer value from the position of the one who produces or exchanges the product. This definition reflects three significant circumstances:
The price is consistent with the consumer value of the product;
The price is consistent with the perceptions and assessments of those who produce or exchange (sell) the product, and not with the assessments of the consumer;
Prices depend on the proximity to the end consumer of those who offer the product.
Pricing policy gives meaning to the total combination of marketing variables offered to consumers, hence pricing decisions must be made in conjunction with product, distribution, marketing and promotion plans. Price is the only element of the marketing mix that generates income; its other components increase the costs of the enterprise.
Pricing policy and strategy, being independent areas of the enterprise’s activity, are at the same time closely related to other elements and areas of marketing activity:
The goals of the pricing policy follow from the goals of the enterprise’s marketing activities and serve as one of the tools to ensure their achievement;
Pricing policy is closely related to marketing research (based on research results, goals, strategies, objectives, principles, and methods for setting prices are determined)
Pricing is related to market segmentation;
Pricing is a means of implementing a marketing program and provides a flexible response to changes in market conditions;
Pricing policy and strategy are related to the product policy of the enterprise, since the price level for differentiated goods and price dynamics depend on the type of goods and the degree of product differentiation by level of novelty.
Financiers usually start with expenses and add the desired profit to arrive at the selling price. Marketers start with end-consumer prices and then work backwards to determine channel prices and acceptable production costs.
Through price competition sellers influence demand through changes in price (Figure 3.1). An enterprise based on price competition must reduce prices to increase sales. In price competition, sellers move along the demand curve, raising or lowering their price.
Rice. 3.1. Price competition
Minimizes price as a factor in consumer demand by demonstrating products or services through promotion, packaging, delivery, service, availability and other marketing factors. Through non-price competition, an enterprise shifts consumer demand to the right (Fig. 3.2), successfully distinguishing its products (services) from competing ones. This allows the company to: increase demand at a constant price; increase the price while maintaining the level of butt ^
Rice. 3.2. Non-price competition
Targeted pricing policy in marketing consists in the need to set such prices for your goods and change them depending on the market situation in order to capture a certain market share, receive the intended amount of profit, etc.
The most typical tasks, the successful solution of which directly depends on the implementation of a well-thought-out pricing policy, are:
o exit to new market - in order to attract the attention of buyers to the company’s products and gradually gain a foothold in the new market, it is advisable to set lower prices compared to the prices of competitors or to your own prices at which goods are sold in already developed markets; further, as a certain market share is gained and a stable clientele is formed, the prices for the company’s goods are gradually increased to the level of prices of other suppliers;
o launch of a new product- the introduction of a pioneering product in a completely new way or with a high degree of efficiency satisfies the needs of customers, providing the enterprise with a monopoly position in the market for some time; suppliers pursue a pricing policy of “cream skimming”: the company sets the maximum high price, which provides a rate of profit many times higher than the average for this industry;
o protecting the position- each enterprise strives to at least maintain the market share it has; the main factors that are taken into account when protecting a position in competition: quality indicators of goods, delivery times, terms of payment, volume and terms of guarantees, volume and quality of service, advertising, work with the public, other activities of the demand generation and sales promotion system;
o sequential passage through market segments- the product is offered first to those market segments in which buyers are willing to pay a high price; after receiving inflated (“premium”) prices at the first stage of sales, the enterprise consistently moves on to supplying goods at lower prices to market segments that are characterized by greater elasticity of demand;
o reimbursement of expenses:
a) quick reimbursement of costs- the relatively low price of a product (the policy of “affordable prices”) is determined by the desire of the enterprise to quickly reimburse the costs associated with its creation, production and sales;
b) satisfactory reimbursement of expenses- a policy of “target” prices is used, that is, those that within one to two years at optimal load production capacity(usually 80%) provide cost recovery and an estimated return on capital invested (mostly 15-20%);
o stimulation of complex sales- a “loss leader” pricing policy is used: by setting a relatively low price for the main product, the seller stimulates the sale of components and complementary goods to obtain the planned amount of profit.
As a component of the marketing mix, pricing policy is developed taking into account: the goals of the enterprise; external and internal factors influencing pricing; the nature of demand (in particular, the degree of price elasticity of demand); costs of production, distribution and sale of goods; the expected value of the product, and the real one; competitors' policies, etc.
Principles used in developing pricing policy:
o attention should be paid primarily to those markets and segments that are strategically important for the enterprise; pricing policy must be oriented towards achieving the main economic goal of the enterprise - making a profit;
o any price cannot be constant, since it is optimal only for certain conditions and a certain period of time; when conditions change, the price must change;
o the optimal price is the one that ensures the consumer’s confidence in the profitability of purchasing the product;
o everything above the zero price makes a profit. Factors determining the increasing value of the price
Declining purchasing power of consumers - they have become more price sensitive;
Foreign competition - the flow of cheap foreign goods forces prices to decrease in many areas;
Differentiation of a significant number of markets into segments requiring different price levels;
Government deregulation leads to intense price competition.
The most common mistakes in pricing are:
o orientation to cost accounting;
o lack of price flexibility;
o the price is set without taking into account the elements of the marketing mix;
o the price does not fully take into account the features various types products, market segments and purchasing conditions.
Unethical aspects of pricing policy in marketing:
o prices are misleading - there are two types:
a) price bait with switching - in a communication appeal they attract the consumer with a low price, but upon purchase the price turns out to be higher;
b) discounts from inflated prices;
o price discrimination - an enterprise offering the same goods at different prices to different groups of consumers;
o predatory pricing - a sharp reduction in price in order to force competitors out of the market;
o price fixing:
a) horizontal - between sellers of the same level;
b) vertical - price fixation in the distribution channel by a strong participant in this channel.
The essence of pricing policy is to create and maintain in dynamics an optimal price structure for goods and markets.
The formation of pricing policy is based on the price setting model (Fig. 3.3).
First stage. There are three main goals of pricing, from which an enterprise can choose:
- Sales oriented- the enterprise is interested in increasing sales or maximizing market share; to increase sales volume, a penetration pricing strategy is used, associated with a low price, which is intended to capture the mass market;
- Profit oriented- the enterprise is interested in maximizing profits, obtaining a satisfactory income from optimizing investments or ensuring quick cash flow; Prestigious (high) prices are used, which are designed to attract a market segment that is more concerned about the quality of the product, its uniqueness or status, than the price;
- Focused on the existing situation- the enterprise strives to avoid unfavorable government decisions in the field of pricing, minimize the result of competitors’ actions, maintain good relationship with members of distribution channels, reduce supplier requests or stabilize prices; The pricing strategy is developed in such a way as to avoid a decline in sales and minimize the influence of market factors.
Rice. 3.3. Pricing Model
Second stage - identification of factors influencing prices. Highlight:
A) external factors, influencing pricing decisions:
Consumers - as a rule, the lower the price, the higher the demand; however, not all consumers respond to prices equally, which serves as one of the criteria for market segmentation;
Government - government measures related to pricing: fixing prices, establishing minimum sizes prices by individual goods and services, various kinds of restrictions on their changes, and the like; the government can influence within the limits of anti-dumping and anti-trust laws, establish fines or other types of penalties for price fixing, for deception in price advertising, etc.;
Participants in distribution channels - wholesale and retail trade - strive to emphasize their importance and insist on increasing trade and wholesale discounts;
Competitors - with a high degree of competition, prices are regulated by the market, price wars crowd out weak enterprises from the market; if competition is limited, then the degree of control of the enterprise over prices increases and market influence decreases;
b) internal factors: costs, but not all of their components are controllable by the enterprise (prices of raw materials, transportation costs, advertising costs).
Multi-step approach to pricing provides six successive steps, each of which imposes restrictions on the following (Fig. 3.4).
Rice. 3.4. Stages of a multi-stage approach to pricing
Third stage - development of pricing strategies.
Pricing strategy- the most appropriate approach for specific conditions to forming a strategic price that ensures the efficiency of production and sale of goods with minimal risk.
The pricing strategy may be based on:
- On expenses- specialists determine the price based on the costs of production, service, overhead and give the desired amount of profit, that is, they determine the marginal price - the minimum necessary to make a profit; demand is not studied; this strategy is used by enterprises whose goal is to make a profit or income from investments;
- On demand- marketers determine the price after studying consumer demand and set a price acceptable for the target market, that is, they determine the “ceiling” of the price that consumers will pay for a product for which demand is price elastic; This strategy is used by businesses that believe that price is a key factor in consumer decision making;
- On competition- prices can be below market, at market level, above market, depending on the image of the product, discrepancies with similar products, the service provided, customer loyalty; This strategy is used by enterprises that face competitors who sell similar products.
Developing a pricing strategy is not a one-time activity. it needs to be revised in cases where: it is created new product; the product goes through various stages life cycle; the competitive environment is changing; competitors change prices for their analogue products; production costs and distribution costs increase or decrease; are happening significant changes in the macro environment.
It is necessary to distinguish between pricing strategies and specifics for new improved and modernized goods and those that are traditionally produced and sold (Table 3.1).
Fourth stage - determination of the final price.
The implementation of a pricing strategy includes a significant number of diverse and interrelated decisions:
- Establishment of standard prices- a participant in the distribution channel determines prices for goods or services, taking into account the possibility of their remaining unchanged for a long time;
- Variable pricing- the company specifically changes prices to respond to changes in costs or consumer demand; Different prices may be offered for different market segments;
- Uniform price system- an enterprise sets the same price for all consumers who would like to purchase a product or service.
To calculate the initial price, different approaches are used:
1) according to geographical principle:
Method of establishing FOB (free carriage) at the place of origin of the goods;
Single price method (including shipping costs)
Method for setting zonal prices;
Basis point pricing method;
Method of setting prices with the assumption of shipping costs;
2) setting prices with discounts and offsets;
3) setting prices to stimulate sales: loss leader strategy, special occasion pricing, cash discounts;
4) setting discriminatory prices- different prices for different customers, for different products, in different places, at different times;
5a) setting prices for new products:"skimming", "durable implementation";
56) when entering the market with an imitation product, choose one of nine options for its quality and price positioning (Fig. 3.5):
Table 3.1
Type of goods |
Types of Pricing Strategies |
|
1. New products |
1.1. High price or skimming strategy |
The highest possible price level is established at the stage of introducing a new product to the market with the expectation of a buyer who agrees to pay this price, and with an increase in production and sales in order to attract new buyers - a gradual reduction in price |
1.2. Strategy low prices(breakthrough) |
A lower price is set than for competitors’ analogue products in order to gain a leading position in the market in conditions of intense competition, and with entrenchment in the market, the price of the product gradually rises to a normal level |
|
1.3. Strategy of focusing on the price of a leader in a market or industry (imitation of the leader) |
The price is set based on the price of a product similar to the price leader |
|
1.4. Strategy for recovering the costs of production, sales and ensuring the average rate of profit in the market |
The price is set based on the costs of production, sales and ensuring the average rate of profit on the market |
|
1.5. Prestigious Price Strategy |
Used for prestigious products, products extremely high quality, products with unique properties, well-known enterprises |
|
1.6. Psychological Price Strategy |
Takes into account the psychology of price perception by a potential buyer; the price is set below a certain round value and creates the impression of a significantly lower price |
|
2. Improved, modernized products |
2.1. Variable (falling) price strategy |
The price is set depending on the relationship between supply and demand and is constantly reduced as the market becomes saturated |
2.2. Pricing strategy for a specific consumer market segment |
Different prices are set for almost the same goods and services (they differ in design, some characteristics), sold to different groups of consumers |
basic species pricing strategies depending
from the novelty of the product sold
End table 3.1
Type of goods |
Types of Pricing Strategies |
|
2.3. Strategy for maintaining the price level while increasing the consumer properties of the product |
Installed to protect the company’s position in the market |
|
2.4. Linked Pricing Strategy |
A relatively low price is set for basic goods while prices for related goods are high. |
|
3. Products that are traditionally produced and sold |
3.1. Flexible pricing strategy |
Reacts quickly to changes in the ratio of supply and demand for goods on the market |
3.2. Prevailing Price Strategy |
Provides for a slight reduction in the price of its products by an enterprise that occupies a dominant position in the market in order to protect itself from competitors |
|
3.3. Price strategy, set lower than most enterprises |
Used when there are complementary products on the market: the main products are sold at regular prices in a set with complementary products, the prices of which are reduced |
|
3.4. Negotiated price strategy |
Installed on specially selected types of products, groups of goods and guarantees discounts compared to the regular price, the same, provided that the buyer fulfills certain conditions when purchasing (based on the number of goods purchased), creates the illusion of significant benefits |
|
3.5. Long term price strategy |
Provides for the establishment of prices for consumer goods that do not change over time |
|
3.6. Pricing strategy for goods that are excluded from production |
Focuses on the circle of consumers who need these particular goods; they agree to pay a high price for such goods, spare parts (collectors) |
|
3.7. Affordable pricing strategy |
Used to quickly reimburse costs associated with the production and marketing of goods of which the company is not confident of commercial success |
Rice. 3.5. Marketing strategy options according to price indicators
5) within the product range- set price guidelines for a number of products (Table 3.2);
Table 3.2
PRICING STRATEGIES WITHIN THE PRODUCT RANGE
Strategy |
Description |
Setting prices within the product range |
Establishing price intervals between goods included in the assortment group |
Setting prices for additional goods that complement |
Setting prices for products that are complementary or auxiliary accessories that are sold with the main product |
Setting prices for mandatory accessories |
Setting prices for items to be used together with the main product |
Setting prices for production by-products |
Setting prices for low-value by-products of production in order to get rid of them |
Setting prices for product sets |
Setting prices for sets of products that are sold together as a unit |
6) initiative price change: proactive price reduction; proactive price increases.
Fifth stage - adjustment of the price level.
The price set by the company is the list price, that is, the “official” price that allows discounts. The list price is sometimes the same as the final selling price, but in most cases the business adjusts it in some way.
Five are often used types of price adjustments:
- Discounts- this is a reduction in the list price offered by the seller if the actions of buyers help reduce his costs; types of discounts: discount for the quantity of goods purchased (progressive)- may be non-accumulative and cumulative in nature; special discount(for a buyer who is of particular interest to the seller) hidden (providing free samples) seasonal (price incentive for purchasing a product outside the sales season); functional(for resellers for performing marketing functions necessary for selling goods to the end consumer) bonus(for increasing the trade turnover of a wholesaler or retailer) early payment discount(designed to stimulate quick payment for goods by buyers), etc.;
- Return- these are payments to buyers from sellers in exchange for goods or certain actions; a common type is trade offset, that is, a reduction in price when a used product is provided as partial payment for a new product;
- Price incentives- short-term discounts offered by businesses to entice consumers to buy a product; they are effective as a reaction to price cuts by competitors or in an attempt to entice users of competing brands to try the product;
- Geographical fixes- businesses make changes to prices to take into account differences in transportation costs due to the location of the seller or buyer;
- Unrounded prices- the company adjusts the list price so that it ends in the odd number following the even number.
Sixth stage - price assessment and control.
Price control involves identifying the need to change prices and adjust pricing strategies in response to customer, competitive, and trade behavior. At the same time, managers should be interested in two main questions: first, how much profit and sales goals are being achieved; secondly, how well the pricing levels and strategies correspond to other elements of the marketing mix, i.e. product, promotion and distribution strategies.
Pricing policy in marketing is a fairly compelling argument in the holistic concept of development of any enterprise that is in one way or another engaged in trade. Prices are everything! They determine the company’s place in the market, its niche among competitors. Unjustifiably low prices lead to the unprofitability of a particular trading organization. The reverse process - unreasonably high prices - leads to a drop in sales. This means that the enterprise will also become unprofitable. Prices become a deciding factor in:
- ensuring profit;
- create demand for products (goods);
- determine the efficiency of a particular structure or division of the company;
- competitive ability of the enterprise itself;
- implementation of the organization’s commercial goals;
- determining the profitability of the organization.
In the pricing policy of an enterprise, marketing should initially include the concept of the interests and needs of the buyer, the consumer factor. Without taking this indicator into account, there will be no successful work and long-term development. For marketing, pricing policy necessarily changes depending on the goals set. For example, if trading enterprise is looking for new sales markets, strives to expand the consumer audience, then in its pricing policy in marketing its management should include the idea of a special reduction in sales revenue in order to attract a new consumer at a low price.
The basis of marketing pricing policy is markup
Marketers also take into account the size of the difference between the price of a product and its cost. This is quite an important factor. No less important is the stage of development of the enterprise, its stage of existence:
Extension;
modernization;
recent discovery;
restructuring;
optimization;
staff reduction;
closure;
bankruptcy.
Pricing in accordance with the marketing pricing policy of any trading enterprise should be guided by this. Pricing policy may change dramatically depending on the above indicators. In marketing, pricing policy also considers the following components of price analysis:
- Determination of price norms and guidelines.
- Taking into account the nature of consumer preferences.
- Competent and adequate price differentiation.
- Factors of price changes.
- Relationship with other marketing factors.
- Flexibility of demand.
- Its relationship with supply.
- Product quality.
- Possible discounts.
- Promotional offers.
- The degree of implementation of the company's development concept.
Moreover, quality is the basis for pricing. For an objective price, product examination should be carried out (quality level, grade, brand, packaging, manufacturer, shelf life).
Marketing pricing policy is divided into pricing and price management
If we consider the pricing policy of an enterprise in marketing, then price here is a key element at the present stage of marketing development. All trading companies are ranked based on their pricing policy. And these statements give a real idea of the economic situation on the market. Only the price provides a guaranteed income if all necessary conditions. Marketing specialists share the concept of pricing and price management as decisive in the pricing policy of a particular organization. Speaking about the first, it is necessary to take into account that quality, demand and the capabilities of buyers determine the price. And when the price has already been set, it is much more difficult to adjust and maintain it. After all, the trading market is quite changeable and flexible. That is why the price management strategy is constant monitoring and marketing of that very market. Associated with these concepts is a markup (as the difference between two prices - wholesale and retail). All participants in the sale and purchase must have an interest in this matter. If the “gap” (markup) is small enough, then interest in selling this product disappears. Although the demand for a low price may increase, and vice versa. This means that the search for the ideal option (“balance point”) is very important.
Pricing- This is one of the most important components of the marketing activities of any enterprise.
Its commercial results depend on how competently and thoughtfully the pricing is structured, and therefore, how well thought out the company’s pricing policy is.
The essence of pricing is to determine what prices need to be set for goods (services) in order to capture part of the market and ensure competitiveness of this product based on price indicators and determine the amount of profit.
For producers operating in the market (regardless of the form of organization of ownership), the question of the price of a product (service) is of great importance. Price is closely related to many determinants of marketing. The company's profitability, financial stability and viability depend on it.
By pursuing a certain pricing policy, the company actively influences both the volume of sales and the amount of profit received. Typically, an organization does not set a goal of obtaining momentary “profit” by selling a product (service) at the maximum price.
The price is influenced by external factors(consumer sector, market environment, level of competition, suppliers and intermediaries, economic situation in the country (region), government regulation prices) and internal factors(company goals, marketing strategy, pricing policy).
The common goals of any commercial organization influencing pricing are: obtaining maximum profits, “capturing” the maximum part of the market, leadership in product quality.
The correct methodology for determining prices, implementing a reasonable pricing policy, and choosing a reasonable pricing strategy are important components successful activities any enterprise in market conditions.
2. Types of pricing
Types of pricing.
1. Discriminatory education– is the sale of a product (service) at different prices, regardless of costs. Establishment of discriminatory prices is carried out depending on:
1) buyer segment, i.e. different buyers are willing to pay different prices for the same product;
2) product variants, i.e. different versions of a product (service) are sold at different prices, regardless of costs;
3) location of the goods, i.e. prices for goods in different places are set differently, even if the costs are the same;
4) time, i.e. the price depends on the season.
2. Psychological pricing– this is determining the price not only from the economic side, but also taking into account psychological factors.
As many sociological studies show, many consumers perceive the price level of a product as the level of quality (the higher the price, the better the quality).
3.Incentive pricing- this is a reduction in price (even below cost) for some time in order to increase sales in the short term. Used to reduce product inventories.
4. Geographic pricing– this is the establishment of different price levels depending on the distance from the manufacturer. This is mainly used to cover transport costs.
3. The importance of pricing in marketing
Pricing is a decisive marketing tool, and the price level is a kind of indicator of the functioning of competition. Price competition exists not only between producers, but also among traders. The manufacturer wants to control two prices: wholesale and retail, since its revenue largely depends on the first price, and the positioning of the product depends on the second. However, at the legal level (in many states) the right to set the retail price is reserved for organizations retail, which limits the possibilities of the manufacturer, who can only guess what price the seller will set based on his wholesale price and trade margin.
Thus, pricing has a direct impact on the production and marketing activities of the company, and therefore predetermines its commercial results.
4. Marketing concept of price
Price- This essential element marketing complex. Firms do not just set a price, but develop a specific pricing policy.
Historically, price has been the main factor determining buyer choice. However, it should be noted that in lately non-price factors began to significantly influence the buyer’s choice: product quality, advertising, service, etc.
Price- This is the ability of a product, expressed in monetary units.
Price- this is the ability to determine the competitiveness of a product, taking into account the amount of costs required for its acquisition and operation.
5. Pricing methods
There are four main methods for determining the base (initial price).
1. Costly method. This is the simplest method in pricing. It lies in the fact that the price of a product is determined on the basis of all costs plus a certain fixed percentage of profit. This takes into account the goals of the entrepreneur, not the buyer.
2. Aggregate method. It lies in the fact that the price of a product is determined as the sum of prices for the individual components of the product, as well as the price of the aggregate (general) unit and the premium (discount) for the presence or absence of individual components.
3. Parametric method. It lies in the fact that the price of a product is determined taking into account its quality.
4. Pricing based on current prices. The essence of this method is that the price of a product is determined based on the prices of similar products, and this price can vary - be more or less.
The problem for the manufacturer is to determine the “right” price, but also to ensure that this price “generates income.” And since the market influences the entrepreneur, the latter must constantly monitor the price level for his product and adjust it using various methods. The following main methods are distinguished:
1) establishment of flexible and long-term prices: establishment of flexible prices depending on time and place;
2) setting prices by market segments: here prices vary depending on which market segment the product is located in;
3) depending on the psychological factor;
4) method of step differentiation: here, gaps (or steps) are identified between the price level in which consumer demand does not change;
5) redistribution of assortment costs;
6) redistribution of item costs: here an initially low price is set for the main product, and a high price for related products;
7) franking method: transport costs are taken into account here;
8) method taking into account discounts: this method used for sales promotion purposes.
6. Pricing
In the market, setting the correct price for a product is a very complex procedure, since the price level is influenced by many factors, such as: production costs, prices of competitors, prices of imported analogues, level of demand, transportation costs, various duties and fees, advertising and various elements of sales promotion, etc.
To determine optimal level prices requires a wide-ranging analysis of the above factors.
The price of consumption or the cost of purchasing a product consists of many components. The composition and structure of these costs are determined taking into account the functions of the product, the availability of additional services (service), their cost, remoteness and other factors.
The price also depends on the length of the consumer’s product life cycle (use life, expiration date, etc.).
As shown marketing research, consumers of different social groups they rank the price and quality of goods differently. And this means that when solving the problem of determining the level of competitiveness of a product (service), it is necessary to take into account different typical consumer groups and different market segments.
By solving the above issues, marketers determine the most optimal price for the product.
Depending on the sales chain, certain types of prices are distinguished.
1. Wholesale– these are the prices at which goods are sold to a wholesale buyer. This price includes the cost of production and the profit of the company.
2. Wholesale trade prices- these are the prices at which goods are sold from wholesale buyer retail. This price is equal to the cost of the product + profit + supply and sales margin.
3. Retail price is the price from the retailer to the final buyer. And this price is equal to the wholesale trade price + trade margin.
7. The role of price in the market
Price- This is the most controlled element of a company's marketing.
The role of price lies in its main functions:
1. Accounting: shows how much labor and materials were spent on the production of goods (services).
2. Distribution: consists of the distribution and redistribution of GDP.
3. Stimulating: it consists of stimulating an increase in the level of product quality, the introduction of scientific and technological progress into production, and the development of service.
4. Social: determining the level of well-being of society.
8. The process of setting the price of a new product
The pricing process is relatively complex and consists of the following steps:
1. Determination of the company’s goals and pricing policy objectives.
2. Identification of all factors that may influence the pricing process.
3. Analysis of sales level for a certain period.
4. Determining the level of demand for the future.
5. Assessment of all company costs.
6. Research and analysis of prices of competing goods.
7. Determination of the pricing method.
8. Development of a pricing strategy.
9. Setting the final price.
10. Identification of the reaction of end consumers and intermediary firms to the set price.
Marketers should also consider psychological factor:
1) many consumers perceive price as an indicator of product quality;
2) setting prices taking into account prestige (typical for expensive goods);
3) strategy of unrounded amounts (for example, 100 rubles is perceived as significantly more than 99 rubles).
9. Pricing regulation
Pricing is influenced various factors external influence: government policy, type of market, number of participants in the distribution channel, competitors, buyers.
The state exerts influence by fixing prices, regulating them by establishing “rules of the game” with free market prices Oh.
Methods of government influence.
1. Entering state list prices.
2. “Freezing” prices for a certain time.
3. Fixation of prices of monopoly companies.
4. Establishing maximum markups on fixed prices.
5. Establishment limit level prices for specific goods.
6. Establishing a specific level of one-time price increases for certain goods.
In a free market price system, the government can:
1) introduce a ban on horizontal and vertical price fixing;
Prices are also determined by the type of market: pure competition, monopolistic competition, oligopoly and monopoly. For example, with pure competition, the seller cannot set a price higher than the market price, since buyers are free in their choice and can purchase the desired product from another seller at a price acceptable to them.
Prices also depend on the number of participants in the distribution channel and may be: wholesale, purchasing and retail. Noticed than more quantity participants, the higher the prices.
The price is also influenced by the demand for goods, its nature, magnitude and degree of elasticity. There is an unspoken law in the market: demand and price are inversely proportional to each other, i.e. the lower the price, the higher the demand, and vice versa.
When determining the final price, it is necessary to take into account the influence of competitors’ prices, as well as their quantity. The company needs this information to decide on the positioning of its product on the market.
10. Indicators of the financial position of the company
Indicators of the financial position of the company:
1. Profitability: profitability, capital productivity, capital return, owner quota, return on capital.
2. Liquidity: absolute, relative and current liquidity ratios, accounts receivable turnover ratio and inventory turnover ratio.
3. Financial stability: degree of self-financing, debt, assets, investment coverage, and cash flow.
11. Consumer reaction to price changes
There is a relationship between price and consumer purchases and perceptions.
Law of Demand:consumer usually buys more products at a low price than at a high price.
Price elasticity is the percentage change in the quantity demanded for each percentage change in price, i.e. the largest changes in price lead to fairly large changes in the quantity demanded. At the same time, total income decreases.
Inelastic demand– price changes have little effect on the level of demand.
Unitary demand– changes in prices are compensated by changes in the volume of demand.
A particular demand is based on the following criteria: the availability of substitutes and the importance of consumption.
There are four types of consumer categories depending on the orientation of their purchases.
1. Economical: consumer choice depends on the value of the purchase, its quality, assortment and price level.
2. Personalized: focus on prestige trademark, prices are almost equivalent
3. Ethical: original patriots of small companies.
4. Apathetic: they don’t care about prices, the main thing is ease of purchase
Komi branch of the Federal State Budgetary Educational Institution of Higher Professional Education
"Vyatka State Agricultural Academy"
Test
in the discipline "Marketing"
on the topic: "Pricing policy"
Syktyvkar 2012
Introduction
1. Pricing policy and its features
1.1 General ideas
2 Objectives of pricing policy
2. Pricing policy and marketing
Conclusion
References
Introduction
Market and price are categories determined by commodity production. Moreover, the market is primary. This is explained by the fact that in commodity production economic relations are manifested mainly not in the production process itself, but through the market. It is the market that acts as the main form of manifestation of commodity-money relations and value categories. In a market economy, the law of value plays an important role, which is implemented through the mechanisms of pricing and balancing supply and demand. It serves as one of the regulators social production, facilitating the flow of resources from one sector of the economy to another and within individual sectors. In this regard, the function of price arises as a criterion for the rational placement of production.
The main feature of market pricing is that the real process of price formation here occurs not in the sphere of production, not at the enterprise, but in the sphere of product sales, i.e. in the market, under the influence of supply and demand, commodity-money relations. The price of a product and its utility are tested by the market and are finally determined in the market. Since only on the market does public recognition of products as goods occur, their value also receives public recognition through the price mechanism also on the market.
Target test work expand on the topic: “Pricing policy.” To achieve this goal, it is necessary to solve the following tasks:
.Consider general features pricing policy.
2.Identify the relationship between pricing policy and marketing.
1. Pricing policy and its features
.1 General ideas
Pricing policy is the principles and methods for determining prices for goods and services. There are micro (at the firm level) and macro (in the sphere of state regulation of prices and tariffs) levels of price formation. The company's pricing policy is formed within the framework overall strategy firm and includes Pricing strategy and pricing tactics. Pricing strategy involves positioning the proposed product in the market.
Pricing policy reflects the general goals of the company that it seeks to achieve by setting the prices of its products. Price policy is general principles which an enterprise intends to adhere to in setting prices for its goods or services.
During the implementation of pricing policy, the company's management must adjust immediate activities and monitor the timing of strategy changes. Prices are actively used in competition to ensure a sufficient level of profit. Determining the prices of goods and services is one of the most important problems of any enterprise, since the optimal price can ensure its financial well-being. The pricing policy pursued largely depends on the type of goods or services offered by the enterprise. It is formed in close connection with planning the production of goods or services, identifying consumer requests, and stimulating sales. The price should be set in such a way that, on the one hand, it satisfies the needs and requirements of customers, and on the other hand, it helps to achieve the goals set by the enterprise, which is to ensure the receipt of sufficient financial resources. Pricing policy is aimed at establishing prices for goods and services depending on the current market conditions, which will allow the enterprise to obtain the volume of profit planned by the enterprise and solve other strategic and operational tasks.
As part of the overall pricing policy, decisions are made in accordance with the position in the target market of the enterprise, methods and marketing structure. The general pricing policy provides for the implementation of coordinated actions aimed at achieving the long- and short-term goals of the enterprise. At the same time, its management determines the general pricing policy, linking individual decisions into an integrated system: the relationship between the prices of goods within the company’s product range, the frequency of use special discounts and price changes, the relationship between prices and competitors’ prices, and the choice of method for setting prices for new products.
Determination of pricing policy is based on the following questions:
what price a buyer would pay for the product;
How does a change in price affect sales volume?
what are the constituent cost components;
what is the nature of competition in the market segment;
what should be the level of the threshold price (minimum) that ensures the company’s break-even;
what discount can be provided to customers;
will delivery of goods and other factors affect the increase in sales volume? additional services.
General Policy enterprises must ultimately be aimed at meeting specific human needs. Therefore, determining pricing policy is one of the most important areas practical activities enterprises.
1.2 Objectives of pricing policy
pricing demand marketing
In the absence of conditions for normal free pricing, one should either strictly limit the scope of free prices, or, allowing their free movement, carry out their state regulation. Therefore it seems possible definition main objectives of pricing policy. When setting these objectives, first of all, the company will have to decide what specific goals it seeks to achieve with the help of a particular product.
The main goal and task of pricing policy on a market scale is to stop the decline in production, limit the rate of inflation, create incentives for commodity producers, and achieve an increase in income through production rather than prices. If the choice of target market and market positioning are carefully thought out, then the approach to developing the marketing mix, including the issue of price, is quite clear. After all, the pricing strategy is mainly determined in advance decisions taken regarding market positioning. At the same time, the company may pursue other goals. The clearer the idea about them, the easier it is to set the price. Examples of such goals that are often encountered in practice can be: ensuring survival, maximizing current profits, gaining leadership in terms of market share or in terms of product quality.
Ensuring survival becomes the main goal and task of the company in cases where there are too many competitors in the market - manufacturers and there is intense competition or customer needs change dramatically. To ensure the normal operation of enterprises and the sale of manufactured goods, firms are forced to set low prices in the hope of a favorable response from consumers. In this case, survival in the global market for an enterprise becomes more important than profit. As long as the reduced prices cover the costs of the hardship, firms can continue to operate for some time. commercial activities.
Many firms strive to maximize current profits. They estimate demand and production costs in relation to different levels prices and choose one reasonable price, which will ensure maximum receipt of current profits and cash and maximum cost recovery. In all such cases, the current financial indicators for the company, long-term ones are more important. Other firms want to be the market share leader because the company with the largest market share will have the lowest costs and the highest long-term profits. Achieving leadership in terms of market share, they reduce prices as much as possible. A variant of this goal is the desire to achieve a specific increase in market share.
A company can set itself the main goal and task to ensure that its products are of the highest quality of all those offered on the market. This usually requires setting a price high enough to cover the costs of achieving high quality and expensive scientific research in the field of design development.
2. Pricing policy and marketing
There are two main ways to set prices for manufactured products based on the costs of production and marketing of the product and on market opportunities (purchasing power). The first method is called cost-based pricing, the second is demand-based pricing. The third, less common, but also important method is pricing based on prices for competitive products.
There are several factors that a company directly influences when choosing a pricing method for its product:
The value factor is one of the most important factors. Each product is capable of satisfying some customer needs to a certain extent. To coordinate the price and utility of a product, you can: give the product greater value, educate the buyer through advertising about the value of the product, adjust the price so that it corresponds to the real value of the product.
Cost factor - costs and profit make up the minimum price of the product. The simplest way to set prices: given known costs and expenses, add an acceptable rate of profit. However, even if the price only covers expenses, there is no guarantee that the product will be purchased. This is why some manufacturing enterprises go bankrupt; the market can value their goods lower than the cost of their production and sale.
Competition factor - competition has a strong influence on pricing policy. You can provoke a surge of competition by setting a high price for a product or eliminate it by setting a minimum price. If a product requires a special production method, or its production is very complex, then low prices will not attract competitors to it, but high prices will tell competitors what to do.
Sales promotion factor - the price of the product includes a trade margin, which pays for the measures taken to stimulate the market. When releasing a product to the market, advertising needs to cross the threshold of perception before consumers become aware of the product. All funds spent on sales promotion must subsequently be repaid through product sales.
Distribution factor - the distribution of a good produced significantly affects its price. The closer the product is to the consumer, the more expensive it is for the manufacturer to distribute it. If the goods are delivered directly to the consumer, then each concluded transaction becomes a separate operation, the money intended for the supplier is received by the manufacturer, but its production costs also increase. The advantage of this distribution method is full control over sales and marketing. When selling a product to a large retailer or wholesaler, sales are no longer counted in units, but in dozens, but control over sales and marketing is lost. Product distribution is the most important factor in marketing after the product itself. When purchased, a product rarely satisfies the needs of all customers completely. Therefore, manufacturers make concessions in quality, weight, color, technical data, etc. more or less willingly depending on the price level, but even if a given seller has the lowest prices on the market, no amount of advertising can compensate for the lack the desired product V right time V in the right place. Finding competent distributors who would actively undertake the sale of goods is a very expensive matter. They will want to be paid for storing goods in warehouses and distributing goods immediately after they are sold. This amount should be included in the price and not exceed similar costs of competitors.
Factor public opinion- usually people have some idea about the price of a product, regardless of whether it is consumer or industrial. When purchasing a product, they are guided by certain price limits, or a price radius, which determines the price at which they are willing to buy this product. The enterprise must either not go beyond the boundaries of this radius in the prices of its goods, or justify why the price for it goes beyond these limits. The manufactured product may be superior to existing analogues in some qualities, and if such advantages are perceived positively by customers, then the price for it can be raised, but if the advantages of this product are not so obvious, it is necessary to resort to additional advertising or other marketing techniques to stimulate the sale of this product on the market.
Service factor - customer service is involved in the pre-sale, sales and post-sale stages of the purchase and sale of goods. Customer service costs must be included in the price of the product offered. Such expenses usually include: preparation of quotes, calculations, installation of equipment, delivery of goods to the point of sale, training and retraining of service personnel (salespeople, cashiers, consumer consultants), provision of a guarantee for the goods or the right to pay in installments. Many products offered in the market do not require after-sales service, but a significant group of consumer goods (such as groceries and convenience goods) require pre-sales service, such as displaying them or demonstrating their qualities. All this service offered must be repaid through the price of the product.
The choice of pricing strategy constitutes the content of the enterprise's concept in determining prices for its products. This determines the planning of the enterprise’s revenue and profit from the sale of goods. An enterprise operating in market conditions, first of all, needs to develop a strategy and principles for determining prices, guided by which it can solve the problems facing it.
The lack of a clearly defined pricing strategy contributes to uncertainty in decision-making in this area by various departments of the enterprise (if it has complex structure), can lead to inconsistency of these decisions and result in a weakening of the enterprise’s position in the market, losses in revenue and profit.
The company does not just set this or that price, it creates an entire pricing system that covers different goods and products within the product range and takes into account differences in the costs of organizing sales in different geographic regions, differences in demand levels, distribution of purchases over time and other factors. In addition, the company operates in a constantly changing competitive environment and sometimes itself initiates price changes, and sometimes responds to competitors’ price initiatives.
A firm's strategic approach to pricing depends in part on the stage of the product's life cycle. The market launch stage places especially great demands. A distinction can be made between pricing a genuine new product protected by a patent and pricing a product that imitates existing products.
Pricing a Genuine New Product - A firm introducing a patented new product to the market may choose either a skimming strategy or a strong market penetration strategy when setting its price.
Cream skimming strategy - many companies that have created patent-protected new products based on major inventions or the results of large-scale and therefore expensive R&D, when the costs of developing a new market (advertising and other means of promoting products to consumers) are too high for competitors, when the raw materials, materials and components necessary for the production of a new product are available in limited quantities or when it is too difficult, It turns out that the sale of new products (if the warehouses of resellers are overcrowded, the economic situation is sluggish, and wholesale and retail trade enterprises are reluctant to enter into new transactions for the purchase of goods), initially set the highest prices for them that can only be asked in order to “skim off the cream.” "from the market. At the same time, only some market segments accept the new product. After the initial wave of sales slows, the firm lowers the price to attract the next tier of customers who are satisfied with the new price. By acting in this way, the company skims the maximum possible financial cream from a variety of market segments. It is desirable to maximize short-term profits until the new market becomes subject to competition.
Using the market skimming method makes sense under the following conditions:
) there is a high level of current demand from a sufficiently large number of buyers;
) the costs of small-scale production are not so high as to negate the financial benefits of the company;
) high starting price will not attract new competitors;
) a high price supports the image of a high quality product.
Strategy for strong market penetration - other companies, on the contrary, set a relatively low price for their new product in the hope of attracting a large number of buyers and gaining a large market share. An example of such a strategy would be buying big factory, setting the lowest possible price for a product, gaining a large market share, reducing production costs and, as they are reduced, continuing to gradually reduce prices. From a purely financial point of view, the position of an enterprise that follows this approach can be characterized by both an increase in the amount of profit and income on invested capital, and a significant drop in profitability. Therefore, when using deliberately low prices, the management of the enterprise must calculate the possible consequences as accurately as possible, but in any case, the degree of risk is very high, since competitors can quickly react to price reductions and significantly reduce the prices of their products. When analyzing the market and drawing up a sales forecast for an enterprise introducing new products to the market at a price below average, one must also take into account that the size of the price reduction for its products should be very significant (30-50%). And this is even with a significantly higher level of product quality, if there are many consumers in a particular market who are willing to pay a higher price for products of improved quality or a higher technical level. In this case, it does not matter whether we are talking about the enterprise entering a new, but, in general, long-established sales market or about promoting a new product on a fairly well-known market. In both cases, the management policy should be approximately the same - to penetrate the market through noticeably lower prices, accustom the consumer to the brand of your company or give him the opportunity to understand the advantages of your products and, therefore, secure a sufficient market share and sales volume . Only when the product is recognized in the market and its advertising among consumers on the word-of-mouth principle has begun, can the company revise both its production programs and product prices in the direction of increasing them. pricing demand marketing product
Anti-competition strategy is designed to prevent potential competitors from entering the market; another purpose is to achieve maximum sales before a competitor enters the market. The price is therefore set as close as possible to costs, which gives small profit and is justified only by large sales volumes. A small company could use this strategy to concentrate its activities on a small segment of the market: quickly enter it, quickly make a profit, and just as quickly leave this segment.
The demand-following strategy is similar to the skimming strategy, but instead of holding the price at a constant high level and convincing buyers to enter new level consumption, the price is reduced under strict control. Often a product receives minor changes in design and features to make it significantly different from previous models. Sometimes you have to change to match the price reduction. appearance product, promotional activities, packaging or method of distribution. The price is held at each new reduced level long enough to satisfy all existing demand. As soon as sales volume begins to decline significantly, you should prepare for the next price reduction.
Thus, prices and pricing policy are one of the main components of marketing activities. Commercial results and the degree of efficiency of all production and marketing activities of a company or enterprise depend on how correctly and thoughtfully the pricing policy is structured.
Conclusion
The essence of a targeted pricing policy is to set such prices for goods and vary them depending on the position in the market in order to capture its share, ensure the competitiveness of goods in terms of price indicators, the intended volume of profit and solve other problems.
In a market economy, the success of any enterprise or entrepreneur largely depends on how correctly they set prices for their goods and services. But this is not so easy to do, because prices are significantly influenced by a complex of political, economic, psychological and social factors. Today the price may be determined by the amount of costs for the production of a product, and tomorrow its level may depend on the psychology of buyer behavior. Consequently, when setting the price of a product, an entrepreneur must take into account all the factors influencing its level and set the price in such a way as to make a profit.
However, currently a significant part of entrepreneurs in our country do not have the necessary theoretical and practical knowledge complex mechanism pricing for goods and services. As a result, they often make serious mistakes when setting prices, which in some cases leads to significant losses and sometimes to bankruptcy of enterprises.
References
Daly J. L. Effective pricing is the basis competitive advantage. - M.: Publishing House "Williams", 2004.- 345 p.
2. Evdokimova T.G., Makhovikova G.A., Zheltyakova I.A., Pereverzeva S.V. Theory and practice of price management. - St. Petersburg: Neva, 2004. - 258 p.
Kotler F. Fundamentals of Marketing / F. Kotler - St. Petersburg: JSC Koruna, 2002. - 697 p.
Krylova G.D., Sokolova M.I. Marketing. Theory and practice: Textbook for universities. -M.: UNITY-DANA, 2004. - 655 p.
Parshin V.F. Pricing policy of an enterprise: a guide / V.F. Parshin. - Minsk: Vysh. school, 2010. - 336 p.
Prices and pricing: Textbook for universities / Ed. V.E. Esipova. 4th ed. - St. Petersburg: Peter, 2005. - 365 p.
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