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Pricing is one of the most important elements of the marketing mix as it is the only mix, which generates a turnover for the organization; the remaining 3p's are the variable cost for the organization. It costs to produce and design a product; it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship (Constantinides, 2006). Pricing a product too high or too low could mean a loss of sales for the organization. Pricing should take into account the following factors:
• Fixed and variable costs
• Competition
• Company objectives
• Proposed positioning strategies
• Target group and willingness to pay
An organization can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.
1. Penetration pricing- Is where the organization sets a low price to increase sales and market share.
2. Skimming pricing- The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
3. Competition pricing- Setting a price in comparison with competitors.
4. Product Line Pricing- Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the g ...