Pricing Decisions and Their Effect Upon Buyers Essay

2840 Words 12 Pages
How do buyers perceive and respond to pricing?
Pricing decisions can be complex and difficult, but they're also some of the most important marketing decision variables a manager faces. Companies that make profitable pricing decisions take what may be called a proactive pricing approach. By considering how pricing decisions affect the way buyers perceive prices and develop perceptions of value, these companies manage to leave less money on the table and successfully raise or reduce prices.

Eight Pricing Fallacies
Many companies continue to develop their pricing strategies and tactics naively and, consequently, don't get the results they expect. Tradition-bound solutions and outdated practices have helped perpetuate a number of pricing
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As a result, many of them do not have a serious pricing strategy and do not conduct pricing research to develop their strategy.

2. Prices can be set annually, typically during the budgeting exercise, and don't require continuous managerial attention between annual reviews. To understand a firm's approach to price management, first consider how it sets its pricing objectives; gathers, processes, and analyzes relevant information; provides for an orderly decision process; and establishes procedures for anticipating and responding to customer, market, and competitor changes. Although managers consistently identify pricing as a major pressure point or marketing headache, organizations have been slow to develop a proactive approach to pricing. This state of affairs exists partly because managers have misconceived price management as setting prices per se rather than as a process.

By not considering pricing as a process, companies fail to distinguish between pricing strategy and pricing tactics; to coordinate pricing decisions across departments; and to have an organizational unit responsible for regularly monitoring price adjustments and price policies. For example, a survey of the 20 largest pharmaceutical companies revealed that companies with an organized pricing function approached pricing as an ongoing process. Those without a permanently assigned pricing

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