Pricing Policy
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ScribdTranslationsPricing Policy
Uploaded by
ScribdTranslationsPricing policy
It is the set of rules, criteria, guidelines and actions that are established to regulate and set the
amount of income from the sale of goods and/or services produced by the public sector
through its agencies and entities. This policy also considers the maximum and minimum price
and rate limits established by the Public Sector for individuals for the aforementioned goods
and/or services it produces.
Price is a marketing variable that summarizes, in a large number of cases, the company's
commercial policy. On the one hand, we have the needs of the market, fixed in a product, with
certain attributes; On the other hand, we have the production process, with the consequent
costs and profitability objectives set. That is why the company should be in charge, in principle,
of setting the price it considers most appropriate.
For the potential customer, the value of the product is manifested in objective and subjective
terms, since it has a very particular scale when it comes to computing the different attributes
of which it is composed, hence the name of expensive or cheap that it gives them. However,
for the company, price is a very important element within its marketing mix strategy, along
with the product, distribution and promotion.
Therefore, we can define the price as the quantitative estimate that is made on a product and
that, translated into monetary units, expresses the consumer's acceptance or not of the set of
attributes of said product, taking into account the ability to satisfy needs.
GOALS
The first thing the company does is decide where it wants to position its market offering. The
clearer the company's objectives are, the easier it will be to set the price: A company can
pursue any of five main objectives when setting its prices:
·Survival
·Maximum current profits
·Maximum market share
·Maximum capture of the upper segment of the market
·Leadership in product quality
·There are also some conditions that favor fixing bass:
·The market is very sensitive to price and a low price stimulates its growth
·Production and distribution costs decrease as experience in production accumulates
·Low price discourages actual and potential competition
IMPORTANCE
This lies in the implicit or explicit agreements between competing firms and is produced in an
oligopolistic market, that is, with few producers, as is the case for most durable consumer
goods. These agreements avoid the possible consequences of a price war between companies
that would contribute to a decrease in the profits of all of them and shift competition towards
other variables, such as product quality, advertising, technical service, distribution.
1.- Factors that influence pricing
Price setting involves the desire to obtain profits on the part of the company, whose income is
determined by the amount of sales made, although it does not have a direct relationship with
the profits it obtains, since, if prices are high, the Total income may be high, but whether this
affects profits will depend on the proper determination and balance between the so-called
"profit areas".
Internal areas External areas
Costs. Markets.
Amount. Types of clients.
Prices. Geographical areas.
Fixed benefits. Distribution channels.
Means of production. Promotion.
Therefore, a rational pricing policy must adhere to the different circumstances of the moment,
without considering only the calculation system used, combined with the indicated profit
areas. For easier understanding we will indicate that these areas are within a context of forces
summarized in:
Business objectives.
Costs.
Elasticity of demand.
Product value to customers.
The competition.
1.1. Business objectives
Normally, pricing is in interaction with other elements of the marketing mix, such as
distribution, advertising, and financial objectives, which are:
Is a short-term increase pursued at the expense of the penetration rate?
Do you want to give priority to a specific product in the range and cause others to become
obsolete?
Do you want rapid penetration into the market and stop possible competitors?
1.2. Costs
They involve the determination of lower limits below which one should not go, under penalty
of jeopardizing the profitability of the business. Unless, damaging this profitability, the
company wants price to play a strategic role, and how? Through:
Rapid market penetration.
Manage to establish relationships with a new client or new segments.
Gain experience by meeting demand and production capacity, in relation to the competition.
1.3. Demand elasticity
It is the knowledge of the degree of sensitivity of the sale of a product, between changes
experienced by some of the different internal factors that act on it. Its analysis will provide
information on possible fluctuations in the sales volume of a product, when the price varies by
a certain percentage or when a budget is increased, such as, for example, that of advertising.
1.4. Product value to customers
To establish a pricing policy, a good knowledge of customers' purchasing behaviors is
necessary, the value that the product sold represents for them and its translation into the
"price", as well as the image they have of them. They do not sell products, but rather
"contributions to the client's activity." This perception depends, as we have said previously, on
objective and subjective factors and allows the practice of differentiated prices, taking into
account the value attributed to the product by the different market segments.
1.5. Competence
Companies, in addition to considering other factors, establish their prices based on the actions
or reactions of the competition. Issues such as the increase or decrease in prices achieve their
strategic importance depending on the possible reactions of competitors and substitute
products and the elasticity of demand. It can be noted, therefore, that pricing factors can be
classified as follows:
Internal factors:
Manufacturing costs plus costs.
Calculation of the dead point.
Return on invested capital.
External factors:
Demand/price elasticity.
Value perceived by the customer.
Competence.