Marketing Pricing Strategies the Pricing of a Essay

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Marketing

Pricing Strategies

The pricing of a product or service is an important aspect of the marketing mix. The pricing of a product will need to be set at a level that will support the firms' long-term profitability; even were there are short-term market penetration strategies or loss leading prices, the ultimate aim of the firm is for the generation of revenues and creation of profit. The pricing strategy chosen by a firm will depend on a number of factors; these will include the market conditions and strategies of the competing or complimentary products, as well as the level of differentiation and the market position that the firm us seeking to gain (Kotler and Keller, 2011). Two examples may be used to assess the way pricing strategies may be formulated; a media distributor and aspirin.

Media Distributor

A media distributor, such as NetFlix or Love Film, has a limited amount of overheads. The media is streamed through the Internet, which means there is a very low marginal cost per customer. One of the main costs associated with the distribution of the media will be the costs associated with gaining a license, which is usually based on the granting of a license for a specific period, regardless of how many of the users access material.

The pricing strategy for media distribution is likely to be undertaken through market orientated pricing. In a market orientated pricing strategy there is an examination of the target market, and the marketplace itself. The target market are examined in order to determine the level of disposable income, the amount they are likely to be prepared to pay for a particular good or service.

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Consideration is also given to the price of existing competition, for example when Amazon reviewing the price for their media distribution Love Film, they are likely to consider the pricing strategy of their closest competitor: NetFlix. If they price above the NetFlix level there will need to justify a premium pricing level, such as emphasizing presence of differentiation (Mintzberg et al., 2008). If Amazon and considering launching or maintaining a price below NetFlix they may be able to gain more customers, but there is also a danger that if it is to know the reduced price will be associated with a reduced level of service or choice. Price is often seen as an indicator of market positioning, and will impact on the decision-making process of consumers (Hooley et al., 2011; Walker et al., 2010). If consumers believe that the service is inferior in some way, this may impact negatively on the decision-making process, 2011). Therefore, the media company is likely to determine the price based on the amount they believe consumers will spend, with reference to the pricing level of other companies. As the majority of costs are overheads, rather than marginal costs, market orientated pricing strategy is suitable. However, there also needs to be a consideration of the overall level of revenue produced, as the fixed costs and desire profit will also need to be met (Drury, 2012).

The strategy is also likely to include an element of psychological pricing, to ensure that the price is acceptable for consumers. These strategies, market orientated pricing, consideration of psychological pricing are also important consideration when the product or service being sold….....

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