Market-Oriented Pricing: Strategies for Management

By Michael H. Morris; Gene Morris | Go to book overview

structure, and levels (tactics). Managers need to determine specific price objectives as opposed to general objectives (i.e., increased sales). The strategy must be a comprehensive statement regarding how price will be used to accomplish the objectives. Implementation of the strategy requires managers to develop a pricing structure that details what aspects of each product or service will be priced. The last component, levels, concerns the daily management of prices and the tactical moves required to achieve the objectives within the strategy and structure. Most important, all four elements must be closely coordinated, with objectives guiding strategy and strategy guiding structure and tactics.

This chapter has also discussed the importance of combining pricing strategy with marketing strategy. The pricing strategy must be consistent with the objectives of the firm's overall market strategy. Considerable thought should be given to the pricing strategy and its implications when combined with product programs, promotion programs, and distribution programs. Also critical is the need to adapt pricing programs to reflect changes in these other areas over the product life cycle.

Attention has also been devoted to the pricing of services, which frequently require programs that differ from those for products. Services offer distinctive pricing opportunities due to their unique characteristics. Because services are intangible, consumed at the time of purchase, often customized to the user, and not able to be inventoried, price plays an instrumental role in managing service demand and supply and in conveying service quality.

Finally, the chapter examined the five key considerations that go into formulating a pricing program: overall company objectives and strategies, costs, demand, competition, and legal issues. Company objectives and strategies provide the underlying basis and direction for all pricing decisions.

Costs establish a minimum level from which to begin the evaluation of possible price alternatives. Demand analysis attempts to ensure that final price decisions are consistent with customer perceptions of value. Competitive considerations serve to assess the realism of pricing actions given market structures and the resources of firms offering similar or substitute products. Finally, pricing strategies must be decided upon within the context of current legal and regulatory constraints. Given their importance, each of these major determinants of pricing programs will be addressed in detail in subsequent chapters.


REFERENCES

Monroe, K. B., Pricing: Making Profitable Decisions. New York: McGraw-Hill, 1979.

Stern, A. A., "The Strategic Value of Price Structure." The Journal of Business Strategy 7 ( 1986): 22-31.

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Market-Oriented Pricing: Strategies for Management
Table of contents

Table of contents

  • Recent Titles from Quorum Books ii
  • Title Page iii
  • Contents vii
  • Illustrations xi
  • Foreword xv
  • Preface xvii
  • 1 - Introduction: Price as a Statement of Value 1
  • References 17
  • 2 - Developing Pricing Programs 19
  • References 37
  • 3 - Understanding and Using Elasticity 39
  • References 54
  • 4 - The Psychology of Pricing 55
  • References 69
  • 5 - Negotiating Prices with Customers 71
  • Summary 85
  • References 86
  • 6 - Examining Costs from a Market Perspective 87
  • Summary 104
  • 7 - Industry and Competitor Analysis 107
  • References 124
  • 8 - Pricing across the Product Line 125
  • Summary 141
  • References 142
  • 9 - Legal and Ethical Aspects of Pricing Decisions 143
  • References 161
  • 10 - Computers as an Aid in Pricing 163
  • References 189
  • Suggested Readings 191
  • Index 197
  • About the Authors 201
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